Talks on new world reserve currency 'legitimate': IMF chief

PARIS (AFP) — IMF managing director Dominique Strauss-Kahn said Wednesday that talks on a new world reserve currency to replace the US dollar were "legitimate" and could take place "in the coming months."

China this week called for a replacement of the dollar, installed as the reserve currency after World War II, with a different standard run by the International Monetary Fund.

"I think the discussion about a new currency is absolutely legitimate," Strauss-Kahn told journalists after meeting with members of the French parliament's finance commission.

Such discussion could "probably take place in the coming months," he said.

US Treasury Secretary Timothy Geithner earlier defended the dollar as a key global reserve currency in Washington.

"I think the dollar remains the world's standard reserve currency, I think that's likely to continue for a long period of time," he said.

People's Bank of China Governor Zhou Xiaochuan this week suggested the IMF's Special Drawing Rights, a currency basket comprising dollars, euros, sterling and yen, could serve as a super-sovereign reserve currency, saying it would not be easily influenced by the policies of individual countries.

Strauss-Kahn cautioned that the dollar's standing was not seriously threatened.

"I don't believe it and even the Chinese don't believe it," he commented, but he added that the global crisis had "renewed interest" in the issue.

The IMF chief earlier met with President Nicolas Sarkozy to discuss preparations for next week's Group of 20 summit in London, called to address the global downturn.

The issue of the world currency reserve is expected to be raised that the April 2 summit of the G20 club of developed and emerging economies.

Economic recovery is possible in the first half of 2010, Strauss-Kahn said, only if governments apply sound policies and move quickly on cleaning up the financial sector.

"A recovery should happen in the first six months of 2010 if all of the sound policies are implemented," he said.