US dollar set to be eclipsed, World Bank president predicts

The United States must brace itself for the dollar to be usurped as the world's reserve currency as American dominance wanes in the wake of the financial crisis, the World Bank president, Robert Zoellick, warned yesterday.

Speaking ahead of the World Bank/IMF annual meetings in Istanbul, he said it was time for a "responsible globalisation", in which decision-making was shared between the old powers and developing countries such as China and India.

Ever since the post-second world war Bretton Woods agreement, which cemented the dollar's ascendancy over sterling, Americans have been able to rely on borrowing cheaply from the rest of the world as governments banked on the dollar as a safe bet. But Zoellick said the greenback's status could be under threat from the growing strength of the Chinese yuan and the euro.

"The United States would be mistaken to take for granted the dollar's place as the world's predominant reserve currency. Looking forward, there will increasingly be other options to the dollar," Zoellick told an audience at Johns Hopkins University in Washington. From now on, he said, confidence in the US currency – and its economy – would have to be earned. "The future for the United States will depend on whether and how it will address large deficits, recover without inflation that could undermine its credit and currency, and overhaul its financial system."

Zoellick's comments came as Beijing launched the first yuan-denominated bond available to outside investors, as it gradually makes its currency more exchangeable on international markets.

"I expect China will inevitably be drawn outward," he said. "Over 10 to 20 years, the renminbi [yuan] will evolve into a force in financial markets."

Several countries, including China and Russia, have repeatedly raised what they see as the problem of excessive dollar hegemony.

Consumers Keep Paying Off Credit Cards, Building Up Savings

Consumers continued to retrench in August, with borrowers reducing their credit card debt for the 11th consecutive month, according to figures released by the Federal Reserve on Wednesday.

Revolving credit debt, mostly through credit cards with balances that are not paid off immediately, dropped by an annual rate of 13.1 percent in August to $899.4 billion, the Federal Reserve reported.

Non-revolving credit debt, such as auto loans and student loans, dropped slightly by an annual rate of 1.6 percent to about $1.56 trillion.

Consumer advocates and industry experts attribute the drop in credit card debt to uncertainly over jobs and rising interest rates. Many card companies have increased interest rates in anticipation of a new law that takes effect in February that will limit their ability to raise rates and fees.

"The recession has led to changes in spending and saving habits for consumers," said Travis Plunkett, legislative director for the Consumer Federation of America. "In other words, consumers are starting to get their financial houses in order, and that means reducing their use of credit."

Indeed, the personal savings rate climbed to 4.2 percent in July, according to government data, up from the near-zero levels of just a few years ago.

"Consumers are making rational choices in a down economy -- they're saving more and spending less," said Kenneth J. Clayton, senior vice president and general counsel for card policy at the American Bankers Association. However, he said, "credit cards remain a viable option, but just merely one of many available to consumers."

Learning Forex is Simple

ADR Report-Foreign shares flat as China offsets telecoms

NEW YORK, Oct 7 (Reuters) - Shares of overseas firms traded in the United States were flat on Wednesday as declines in telecoms and Brazilian banks were offset by gains in Chinese companies.

Among the volume leaders in the session, Taiwan Semiconductor (TSM.N) fell 1.9 percent to $10.17, Paris-based Alcatel-Lucent (ALU.N) gained 3.6 percent to $4.60 and Brazilian miner Vale (VALE.N) rose 2.3 percent to $24.41.

The Bank of New York Mellon index of leading American Depositary Receipts (ADRs) .BKADR fell 0.02 percent while the U.S. benchmark S&P 500 index .SPX edged up 0.27 percent.

On a regional breakdown, Latin American ADRs were the worst performers, hurt by declines in Brazilian banks in the wake of an $8 billion initial public offering by Santander Brasil (SANB11.SA), the Brazilian unit of Banco Santander (SAN.MC).

Santander Brasil's shares sank due to the size and prize of the offer, traders said. For details see [ID:nN07475718]

ADRs of Santander Brasil (BSBR.N) fell 2.9 percent to $13.01. Top Brazilian banks Itau Unibanco (ITUB.N) and Banco Bradesco (BBD.N) fell 2.5 percent and 3.7 percent respectively.

The BoNY Brazilian ADR index .BKBR lost 0.25 percent and the index of Latin American ADRs .BKLA fell 0.24 percent.

Telecommunications companies weighed on the European ADR index .BKEUR, which fell 0.06 percent.

Top drags included UK's Vodafone Group plc (VOD.N), down 1.1 percent to $22.14 and Spain's Telefonica (TEF.N), down 1.4 percent to $83.86. The BoNY international telecom 35 index .BKTTL slipped 0.86 percent.

Japanese telecoms Nippon Telegraph and Telephone (NTT.N) and NTT DoCoMo (DCM.N) also posted losses, and limited gains on the BoNY Asian ADR index .BKAS, up 0.19 percent.

The Asian index was buoyed by gains in Chinese firms including bellwethers PetroChina Co Ltd (PTR.N), up 1.9 percent to $118.32 and China Mobile Ltd (CHL.N), up 1 percent to $50.13, bucking the global bearish telecoms trend.