The euro shot higher versus the dollar after word broke that China had asked to debate the issue of a new global reserve currency at next week’s Group of 8 summit in Italy.

In a story by Reuters, G8 sources said China made the request during preparatory talks on a joint statement that would be issued on the second day of the summit. That July 9 meeting would include the G8 countries (Canada, France, Germany, Italy, Japan, Russia, the UK, and the US), as well as the G5 nations (Brazil, India, China, Mexico, and South Africa).

Specific mention in the communiqué remains open, and officials will further discuss preparatory talks on Friday. But at the heart of the debate is China and other emerging countries, who are seeking an alternative currency, in order to lessen their exposures to the US dollar. This reflects a shifting balance of power in the world economy.

China holds more US Treasury debt than any other country, and has expressed concerns regarding the US’s spending and stimulus programs. Its last proposal to use SDRs failed to gain ground when other world leaders continued to back the dollar as the global reserve currency.

The euro leapt to around 1.4202 per US dollar, but gradually faded to 1.4146 by the close of the US equity markets.

From the Bull Pen: Precious metals continued to gain ground today, and bulls can look to the Silver ETF (SLV). Sell stops can be set below today’s lows ($13.30).


From the Bear Cave: It seemed as if China showed a sense of urgency regarding its concerns with the dollar, and the markets responded in a big way. The intermediate trendline for the dollar continues to point down. Bears can play the dollar bearish fund (UDN). Sell stops can be set below $26.70.

One more day, Minyans, until the holiday weekend. Send pics of your best BBQ creations to terry@minyanville.com.

Have a good night!