Fri Jul 3, 2009 1:25pm EDT

* Sees stability based on greenback in global crisis

* Expects forex discussion at summit in Italy

* Sees room for C$ appreciation as part of realignment

By Louise Egan

OTTAWA, July 3 (Reuters) - The U.S. dollar as the global reserve
currency of choice has been a stabilizing force during the current
financial crisis, Canada said on Friday, downplaying calls to debate
the greenback's dominant status.

Canadian Finance Minister Jim Flaherty added his weight, at least for
now, to Japan's opposition to a Chinese push for a new super-sovereign
reserve currency that would displace the U.S. dollar. [ID:nL3591266]

Flaherty also told
reporters he could see the Canadian currency appreciating as part of a
worldwide shifting of foreign exchange rates to correct imbalances.

He said he did not know whether the U.S. dollar's role as the global
reserve currency would be included in the final communique of a meeting
between the Group of Eight leaders and a heads of emerging nations in
Italy next week.

"It's an issue that we
have not addressed other than to say that, in the midst of what is
still a significant global recession, it's important that we aim for
stability, and stability has been based on the U.S. dollar as the
global currency," Flaherty said via teleconference from Chile.

China has asked for a debate on a new global reserve currency by the G8
and five emerging economies, G8 sources have told Reuters. News of the
Chinese request helped push the U.S. dollar down to a three-week low on
Wednesday. [ID:nL1293071]

Flaherty said he
expected there to be a more general discussion on foreign exchange at
next week's summit, which starts with the G8 nations alone and then
broadens to include emerging nations.

Commenting on Canada's currency, he said there was room for the Canadian dollar to appreciate further as part of the global realignment of currencies that many believe should include a rise in the Chinese yuan and a weaker U.S. dollar.

"Yes, of course it can," he said when asked if there was scope for a strengthening of the Canadian dollar.

"A lot of people view the Canadian dollar in line with energy prices,
with oil prices for example, so some appreciation there is likely to
have some upward effect on the Canadian dollar vis a vis the U.S.
dollar," he said.

"Our main concern is not to see nonmarket-related fluctuations in the currency."

Flaherty also gave his backing to the Lecce Framework of rules for
global finance, which the G8 finance ministers have adopted and next
week's summit will now review.

Some observers have criticized it as being too vague and voluntary, but
he said: "I think it is a statement of principle that is useful."

However, he repeated Canada's position that sound regulation must begin
at home and that it, coupled with transparency, would build
international confidence.

"It's always been recognized that each country needs to get its own
financial system in order. It's also been accepted, including by the
United States, that there needs to be transparency so that the
financial system participants in one country can know that they can
rely on financial system participants in another country."

He predicted jobless rates in Canada and the United States would
continue to rise but said he had not seen any signs in Canada of wages
contracting.

"The unemployment rate in the United States is well over 9 percent now
and it's likely to go higher into 2010. We expect some continuing
growth in unemployment in Canada as well. Recovery from the recession
will happen before the reduction in unemployment," Flaherty said.

Flaherty was speaking from Chile, where is is attending a meeting of
finance ministers of the Americas, along with officials from the World
Bank, Inter-American Development Bank and the International Monetary
Fund. (Additional reporting by Randall Palmer and Ka Yan Ng; editing by
Peter Galloway)

© Thomson Reuters 2009 All rights reserved

http://www.reuters.com/article/usDol...090703?sp=true

Good report. Possibly the dollar will rise soon. $0.62 is not good..