The role of the dollar in Asia could be diminished if the region pursues closer economic integration, said a former top Japanese currency official who is expected to advise the new finance minister. Asian countries aren't likely to try to exclude the dollar as the region isn't strong enough economically to be totally self-sufficient, Toyoo Gyohten told Reuters in an interview on Thursday.
A lesser role for the dollar could actually benefit the United States as it could help it adjust imbalances in its economy, he said. Global imbalances, such as large current account surpluses and deficits, are emerging as a main theme for policy makers as they gather for a G20 summit later on Thursday. "In the case of Europe, the introduction of the euro led to a reduced role for the dollar, so you could imagine the same thing happening with Asian economic integration," said Gyohten, currently president of the Institute for International Monetary Affairs.
"This could actually be helpful for the United States." Some players sold the dollar versus the yen after Gyohten's comments, though the impact was limited, traders said. "The dollar's broad slide had resumed before Gyohten's comments as London players join the market, but some may have used his remarks as an excuse to sell dollar/yen to push the pair lower," said a proprietary trader for a Japanese bank.
The US currency fell as low as 90.41 yen on trading platform EBS, in sight of a seven-month low of 90.12 yen hit last week, before trading at 90.61 yen, down 0.7 percent on the day. Japan's new prime minister, Yukio Hatoyama, has said that he hopes to see an Asian economic community but that such a community wouldn't try to diminish the status of the dollar.