Now India Is Challenging The Dollar As World's Reserve Currency

Now India has joined Russia, China, Brazil and other countries calling a new reserve currency besides the dollar. Make no mistake, next week's G-8 meeting will be all about how to get away from the dollar as the world's reserve currency.-Lou

India said to question dollar's international status

NEW YORK (MarketWatch) -- A senior official in the Indian government has joined the growing chorus questioning the U.S. dollar's unofficial position as global reserve currency, according a report published Saturday.

Suresh Tendulkar, chairman of the Prime Minister's Economic Advisory Council, said he's urging India to diversify its foreign-exchange reserves and hold fewer dollars, according to Bloomberg News.

Tendulkar said the fact that India holds so much of its reserves in dollars "is a problem for us," reported Bloomberg.

Tendulkar's comments come one week after the People's Bank of China's annual financial stability report repeated an earlier call by central bank chief Zhou Xiaochuan for the development of a new super-sovereign currency that would largely take the place of the dollar. See related story.

In early June, an official at The Bank of Russia reportedly said it will cut the share of U.S. Treasurys in its foreign exchange reserves.

Alexei Ulyukayev, first deputy chairman of Russia's central bank, said the bank plans to reduce the amount of Treasurys and that Russia would switch some of its reserves into bonds issued by the International Monetary Fund, according to reports. See story.

Also on Saturday, China Daily reported that former Chinese Vice-Premier Zeng Peiyan in a speech in Beijing on Friday called for a new system to ensure the stability of the major reserve currencies. Zeng is the head of China Center for International Economic Exchanges.

Under the existing reserve currency arrangements, there needs to be tighter controls because "your currency is likely to become my problem," said Zeng, according to China Daily.

The rhetoric towards the dollar's international status comes as leaders of the world's leading economies ready to meet in Italy for the G8 Summit 2009, which will be held from July 8 to July 10. The heads of Canada, France, Germany, Italy, Japan, Russia, U.K. and U.S. will gather in L'Aquila, and discussions of ways to improve international finance are on the agenda.