Treasury Secretary Hank Paulson told investors in the United Arab Emirates on Monday that the U.S. is committed to pursuing policies that maintain the U.S. dollar's status as the world's reserve currency.
Paulson's comments come as the value of the dollar has dropped against foreign currencies and the Federal Reserve has lowered interest rates again dramatically to combat the credit crunch, while government deficits at the state and national level are increasing in the U.S.
In this environment, foreign investors are feeling jitters about continuing to finance U.S. debts, and oil producing nations in the Middle East are grappling with high inflation and re-evaluating their dollar currency pegs. Meanwhile, some economists have predicted the end of the dollar's status as the world's reserve currency in the next two decades.
"I am committed to promoting policies that enhance the underlying competitiveness of the U.S. economy and ensure that the dollar remains the world's reserve currency," Paulson said in a speech to the U.S.-U.A.E. Business Council, which was the final stop on a four-day tour to the Middle East to reassure regional leaders that the U.S. still welcomes their investments."The U.S. dollar has been the world's reserve currency since World War II and there is a good reason for that," Paulson said. "The U.S. has the largest, most open economy in the world, and our capital markets are the deepest and most liquid. The long-term health and strong underlying fundamentals of the U.S. economy will shine through and be reflected in currency values."