China boosts the anti-dollar

Last week, most of us laughed when news broke that Russia was seeking an expansion of the IMF’s SDR. This week, China joined the call when the governor of its central bank, Zhou Xiaochuan, posted an essay on the topic on the People Bank of China’s website. Poor old Tim Geithner, the US Treasury secretary, was clearly wrong footed by the suggestion. His initial reaction, along with Federal Reserve Chairman Ben Bernanke, was to dismiss the idea, but he then backtracked and said it was worth considering. Responding to a question at a Council of Foreign Relations event in New York, he said: “As I understand it, it’s a proposal designed to increase the use of the IMF’s Special Drawing Rights. I am actually quite open to the idea.” The result was inevitable. The dollar got a kicking. The main beneficiary was the euro, which is rapidly assuming a new moniker: the anti-dollar.