The Saudi central bank chief said he believes the U.S. dollar will remain the world's key foreign reserve currency, offering the endorsement at a meeting of business leaders taking stock of the global financial crisis.
Participants at the Jeddah Economic Forum also discussed the growing role of emerging market economies in helping steer the world through its worst recession in over six decades.
"The dollar is still pre-eminent in its role as a reserve currency," said Mohammed al-Jasser, governor of the Saudi Arabian Monetary Agency.
Even so, as an official reserve currency, the "euro is gaining ground," he recently told the conference in the Saudi commercial hub of Jeddah.
The remarks offer another indication that even with the wide fluctuations in the U.S. currency over the course of the global meltdown, suggestions put forward last year by China for a new international reserve currency have yet to gain serious traction, at least in the Gulf region.
Saudi Arabia, like most other Gulf Arab nations, pegs its currency to the dollar, and trade in its chief export — oil — is also in dollars.
Al-Jasser dismissed as untenable the idea of using the International Monetary Fund's Special Drawing Rights — a quasi-currency used by the IMF in its dealings with member governments — as an international reserve currency.
China has in the past pushed for using SDRs as an alternative to the dollar, largely on fears that its extensive foreign reserves were being hit hard by the weakness in the U.S. currency.
Saudi Arabia's foreign currency reserves, which are in excess of $400 billion, are largely held in dollars.
The kingdom, home to the Arab world's largest economy, is also a driving force behind efforts to set up a unified Gulf currency.
It, along with Kuwait, Qatar and Bahrain, is pushing ahead with the plan while Oman and the United Arab Emirates, home to glitzy but debt-saddled sheikdom Dubai, have said they will not participate.
High among the issues to be discussed in the four-day conference, which began Saturday night, are steps to reform the world financial order and how to avoid the mistakes that helped bring about the recession.
A key theme that has emerged is the growing role of strong emerging economies like that of OPEC powerhouse Saudi Arabia and the need for greater regulatory supervision.
"We learned clearly that we need an improved financial regulatory framework" to ensure an effective and strong global system, Deputy U.S. Treasury Secretary Neal Wolin said, adding that this was "something we are working on very hard in our own country."
The Obama administration is looking to push legislation through Congress aimed at increasing consumer protection on loans and credit cards, and restrictions on previously unregulated financial products.
The legislation is also aimed at finding ways to dismantle failing firms without resorting to taxpayer bailouts. The U.S. House of Representatives has already passed its version of the bill.
While the worst of the recession appears to be over, Wolin said continued volatility in world markets demonstrated the fragile nature of the recovery. He said the U.S. would continue to see growth this year.
Economic growth, however, has yet to translate into the kind of job creation needed after the crisis, he said.
Some in the conference's panel discussions cautioned that greater oversight and regulation should not stymie free trade through protectionism.
David Rubenstein, co-founder and managing director of private equity firm Carlyle Group, said new restrictions should not be so onerous as to discourage banks from lending.
Rubenstein said he expects that in the post-meltdown global economic order, U.S. financial institutions will not have the same influence they had before 2008 when the crisis made its presence clearly felt worldwide.
"The American ability to say 'here's how you should run your economy' is reduced a bit since our ability to run our own economy wasn't so spectacular," Rubenstein said.
Rubenstein said that while the U.S. remains the world's largest economy, it now represents 22 percent of the world's gross domestic product compared with 48 percent after World War II.
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