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Banker predicts weakened dollar in long term

(Xinhua)
Updated: 2008-09-28 20:05

TIANJIN -- The US dollar would face short-term fluctuations and weaken in the long run, a leading Chinese banker predicted here on Sunday.

Related readings:  Finance: Expert urges interest, exchange rates reforms  US Congress reaches tentative deal on bailout bill  Lehman files for bankruptcy

Speaking at the Summer Davos forum in this north China port city, Bank of China Vice President Zhu Min said he believed it would be less likely for the United States to sell more treasury bonds to other countries to obtain the funds needed to bail out the turmoil-beleagued financial market, which would only accelerate inflation in other countries.

Instead, the US could only issue other bonds to finance the rescue plan, which Zhu said would definitely cause the dollar depreciation in the long term. The bailout fund will have topped one trillion US dollars if the US Congress passes the Fed's 700 billion dollar financial rescue plan.

Zhu said market confidence could not be recovered simply with the help of the 700 billion dollars, citing the US dollar is a currency with turbulent fluctuations.

"It takes a long time to solve the current liquidity strains and investment crisis," Zhu said.

Zhu also saw short-term fluctuations for the dollar since investment demand for the dollar is dropping and there could be " more bad news" in the coming few weeks.

Well-known Chinese economist Cheng Siwei told the forum that the pace of appreciation for the Chinese currency, the yuan, should be slower.

The United States and some European countries have been arguing that the yuan's value is too low, which gives Chinese exporters an "unfair advantage." The yuan has witnessed continuous appreciation in recent years, but this time more and more Chinese enterprises, including textile firms, are complaining about money losses and possible shutdown.