China said the dollar will retain its global dominance for years to come, offering its assurances ahead of the Group of Eight summit just as it takes another step to boost the profile of its own yuan currency.
Beijing has floated the idea of looking for an alternative to the dollar as global reserve currency and France and Russia on Sunday called for a debate on the matter at this week's G8 summit in Italy, expanded to include China and other developing nations.
However, G8 sources suggested there was no appetite for any change to the status quo, and China itself played down the likelihood of a change in the current regime.
"The U.S. dollar is still the most important and major reserve currency of the day, and we believe that that situation will continue for many years to come," Chinese Vice Foreign Minister He Yafei told reporters in Rome.
The debate is highly sensitive in financial markets, which are wary of risks to U.S. asset values, and last week the dollar dipped briefly after suggestions its role may form a part of the agenda of the July 8-10 summit.
China's assurances helped the U.S. dollar inch higher in very thin Asian trade on Monday.
The U.S. currency and government bonds were also supported as safe havens amid market caution ahead of the G8 summit and given the weak start for stock markets, still smarting from last week's dismal U.S. jobs report.
Japan's Nikkei slipped 1.5 percent, while the MSCI index of stock markets elsewhere in Asia-Pacific eased 0.3 percent, reflecting doubts over the strength and staying power of a global recovery.
Seoul shares bucked the region-wide trend, lifted by a strong earnings guidance from Samsung Electronics ahead of its results due on July 24.
SAMSUNG CHEERS
In its first ever profit guidance, the world's top maker of memory chips and flat screen TVs, forecast second-quarter earnings well above market estimates, boosting its shares by more than 4 percent.
"Shares started off weak but Samsung Electronics' earnings estimates boosted market sentiment, and brightened views on the broader outlook ahead of earnings season," said Kim Seung-han, a market analyst at HI Investment Securities.
With light data calendar this week, investors are likely to focus on the upcoming deluge of quarterly earnings reports and the meeting of the world's top industrial nations.
The G8 summit is expected to highlight signs that major economies were stabilising, but also emphasise that it was too early yet to withdraw policy stimulus aimed at preventing the recession from becoming a depression.
In Japan, central bank governor Masaaki Shirakawa said funding remained tight for many firms even as some calm returned to financial markets. The comments reinforced views that the Bank of Japan will extend its emergency corporate financing support beyond its September deadline.
In the United States, Vice President Joe Biden admitted authorities were surprised by how bad the economy was, but said the White House did not believe a second stimulus was needed to bring unemployment down from its 26-year high. Last week's data that showed U.S. employers cut 467,000 jobs last month, far more than expected, served as a reminder that job losses will keep piling up for months to come and the road to recovery will be long and bumpy.
Analysts, however, point out that forward-looking indicators are more encouraging.
Later on Monday, a gauge of the giant U.S. services sector is expected to show a rise to 46.0 in June, from 44.0 the month before.
The global crisis triggered by the bursting of the U.S. housing bubble has spurred worries about the U.S. economy's health and revived calls for a new currency system that would reflect the shifting balance of power in the globalised economy.
China, which holds more U.S. Treasury debt than other country, has been particularly vocal and its central bank chief has suggested the dollar might one day be replaced with the International Monetary Fund's Special Drawing Right.
And while Beijing concedes the proposal is far-fetched, it has already been seeking to reduce its reliance on the dollar as trade settlement currency and promote the use of yuan by signing a series of bilateral currency swap agreements.
On Monday, China officially launched a pilot programme to allow companies to settle imports and exports in the yuan in selected areas in a further step towards internationalising its currency.
