The US Treasury Secretary Timothy Geithner in his two-day visit to the Middle East is likely to make serious effort to allay his country’s largest investor region’s fears over the US dollar’s volatility and depreciation. Geithner is expected to reassure its investor allies that the burgeoning budget deficit will not spark off inflation which would in turn devalue the USD.
It should be recalled that China, the largest investor with about $1 trillion in the US treasuries has begun trial trade in its own currency since this month with its trading partners to cut down its losses in international trade. On sixth of this month, three Shanghai companies became the first to conduct cross-border trades with yuan/renminbi. The new Chinese rule allows using yuan instead of USD to settle trade accounts with merchants in Hong Kong and Southeast Asian countries on trial basis.
Though Geithner during his visit to China last month gave assurance on the safety on its investments, China did not seem to be convinced by the economic developments in the US lately. Nonetheless, Geithner during his Middle East visit is likely to stick on to Obama administration’s commitment to protect the value of the dollar and maintaining investor confidence in the US financial system.
Geithner is scheduled to hold high-level meetings on Tuesday and Wednesday with top government officials and leading business executives in Saudi Arabia and the UAE before leaving to visit Britain and France with similar goals. According to sources, Geithner is also expected to apprise the leaders of the US administration’s plans to bring down the deficit the moment the economy starts looking up.
However, it is not known how Geithner would defend the talks over the second economic stimulus package and the rising figures of the federal budget deficit for this fiscal year to nearly $1 trillion. Last week, one of Obama’s top allies in Congress had said that the lawmakers must be open for additional stimulus to overcome the economic uncertainties prevailing in the nation if the injection of $787bn to the economy in February was not providing desired results.
Toboc Trade News