[DanRath]

The G8 meeting concludes today. There has some focus (in the FT for instance) on yesterday's comments from a Chinese official that there should be a better and more diversified reserve currency system. But this is not a big surprise - China had already signalled that it would bring up the issue at the meeting. What matters more is whether the reserve currency issue is mentioned in the joint G8+G5 statement - it wasn't in the draft statement released earlier this week and remains unlikely to find its way into the final version. Moderate dollar strength is likely to be viewed as being in the interest of developed countries in terms of keeping long-term rates down and relieving what may emerge as commodity price pressures on inflation down the road. Nonetheless, the fact that the discussion has become so public suggests that a USD sell-off would accompany an eventual global recovery in the medium and long terms as confidence is restored and USD weakness becomes more acceptable.