17 July 2008
Saving the Dollar
Posted by Joy Bischoff under: World Economy .
One of my biggest concerns regarding the economy is the loss of confidence in the dollar. If other countries, especially China, decide to dump their dollars, then OPEC will switch from the dollar to the euro and our currency will crash. Therefore, this article makes me a little concerned but hopefully since the panic of earlier this week is dying down, maybe nothing drastic will occur.
Sovereign funds cut exposure to weak dollar
By Henny Sender in New York
Published: July 16 2008 22:35 | Last updated: July 16 2008 23:24
Some of the world’s largest sovereign wealth funds are seeking to scale back their exposure to the US dollar in a sign of global concern about the currency.
One big sovereign fund in the Gulf has cut its dollar-denominated holdings from more than 80 per cent a year ago to less than 60 per cent, while China’s State Administration of Foreign Exchange (SAFE) has been looking to strike deals with private equity firms in Europe as a part of a strategy to reduce its dollar holdings.
overeign wealth funds have played a leading role in helping to recapitalise faltering US banks, but have lost money so far on such investments. Continuing market turbulence has further shaken their faith in US policy and policymakers.
Kenneth Shen, head of the strategic and private equity group at Qatar Investment Authority, another Middle Eastern fund looking to do more deals in Europe than the US, aired such concerns publicly at a conference in Hong Kong late last year. “The outlook for the US dollar is a significant issue for investors contemplating US-related investments,” Mr Shen said.
The shift at China’s SAFE is significant because it holds the majority of the country’s $1,600bn in foreign currency reserves in dollar instruments and has lagged behind other governments, such as Singapore, in diversifying its currency exposure. SAFE has been holding talks with Europe-based private equity firms about putting billions of dollars into their latest funds, precisely because these funds are not dollar-denominated, say people familiar with the matter.
By allocating money to Europe-based private equity firms, SAFE could diversify away from the dollar, at least at the margin, without spooking the currency markets and driving the dollar down in a disorderly manner.
2 Comments so far...
Bryon Says:
17 July 2008 at 11:48 am.
I don’t like how that sounds at all. The founding fathers really had something when they said we need to use gold to back our money. Now we have the faith of the consumer and that is all that holds us up.
E.E. Says:
17 July 2008 at 1:11 pm.
The super wealthy have been quietly converting their dollars and then keeping their dough in foreign banks like Lichtenstein.
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