MercoPress. South Atlantic News Agency

The US dollar to remain as world’s reserve currency says IMF chief

Strauss-Kahn: United States is the most powerful economy

The US dollar is likely to remain as the world’s reserve currency said on Wednesday International Monetary Fund Managing Director Dominique Strauss-Kahn interviewed by France 24 television.

The IMF chief said that in spite of the better signals, 2009 was going to be a bad year financially. But he also admitted he was shocked at some of the generous bonuses announced in US banks.

“It's good that financial markets are doing better. It's good that companies are starting to have better results. But 2009 will be a bad year,” he said.

But “we are only halfway through. The rest of the year will not be good. And the pick-up that we see really only exists as of 2010. So we mustn't get wrapped up in it” he warned.

Even when the economy has recovered, unemployment will remain high and rise for some time, he said. Asked whether the IMF Special Drawing Rights (SDR), an international reserve asset, could replace the US dollar as the world's main reserve currency, he said: “We are far, very far from having a situation in which the supremacy of the dollar would be contested”.

“The reality...is that that the United States is the most powerful economy and so while we can still think about a different system I do not think that the IMF SDR would be in a position to replace the immense mass of dollars circulating in the world which are used for international payments,” he added.

Asked whether he was concerned about large bonuses which encouraged the kind of risk-taking that helped lead to the financial crisis, he said: “Frankly, I'm scandalised by what I'm seeing. I would have thought banks had learnt the lesson”

Recent bumper profits for banks including Goldman Sachs and JP Morgan have raised concerns among politicians that banks have not sufficiently changed their business practices in the wake of the financial crisis, plus the fact that all rescue plans have been with taxpayers’ monies.