The euro is rallying to the highest level of the day vs the $ after a Canadian official, speaking anonymously, said that while the G8 will likely discuss the US$ and its reserve currency status, there will not be explicit US$ reserve currency comments in the official communique. With about 70% of China’s almost $2 trillion of reserves in US$ assets in particular, the shift towards an alternative to the US$’s reserve status will be a very evolutionary process and a change won’t be the result of some event as China wants no part of a disorderly $ decline considering such large holdings. Many other central banks can say the same thing. The end result on this issue seems to be clear considering the monetary and fiscal policies of the US government but the destination is more uncertain and hopefully orderly.

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