China raised the stakes in its long-haul drive to unseat the dollar as the world's dominant currency, seeking a debate on an alternative reserve regime at next week's Group of Eight summit.
The global financial crisis set off by the bursting of the U.S. housing bubble nearly two years ago yielded new urgency to calls from emerging powers for a new currency system that would reflect the shifting balance of power in the globalised economy.
G8 sources told Reuters that Beijing has asked to debate its proposals at the summit in Italy and the issue could be mentioned in the summit statement. China's deputy foreign minister said on Thursday he was unaware of such a request, but that it would be "normal" for the issue to be raised during the meeting.
"This financial crisis has fully exposed some shortcomings in the international monetary system," He Yafei said. "Of course we hope that in the future the international monetary system can diversify," he told a news briefing in Beijing.
Trillions of dollars committed by U.S. authorities to revive the sagging economy fanned fears of inflation that would erode the value of dollar assets held by official and private institutions around the world.
China, which holds more U.S. Treasury debt than other country has been particularly vocal, proposing to replace the dollar with the International Monetary Fund's Special Drawing Rights (SDRs) based on a basket of currencies as a super-sovereign currency.
Analysts believe any move away from the dollar would be slow and the report about Beijing's request only temporarily dented the U.S. currency ahead of U.S. jobs data.
ALL EYES ON JOBS
The influential payrolls report due at 1230 GMT is expected to show the world's biggest economy lost 363,000 jobs in June, up from 345,000 in May, bringing the unemployment rate to a 26-year high of 9.6 percent from May's 9.4 percent.
Markets are, however, wary of a negative surprise after Wednesday's news that private sector job cuts last month exceeded expectations reaching nearly half a million.
In Europe, May labour statistics are expected to show euro zone jobless rate creeping up to 9.4 percent from 9.2 percent, near a 10-year high.
Rising unemployment is emerging as the biggest challenge to recovery, which governments' around the world are trying to stoke with record low interest rates and by pumping trillions of dollars into their economies.
Manufacturing surveys from the United States, Europe and China offered more evidence on Wednesday that the deepest global economic downturn since the 1930s Great Depression was abating and kept alive hopes that a recovery was on its way.
The growing number of companies tapping markets with share issues also showed confidence was returning.
Global miner Rio Tinto Ltd on Thursday reported that its $15.2 billion rights offer, the fifth-biggest ever, generated strong demand from UK investors.
Bets on the global upturn drove global stock markets to double-digit gains in the second-quarter, but caution marked the start of the third quarter.
Tokyo shares were marginally lower and the MSCI gauge of stocks elsewhere in the Asia-Pacific was slightly up on Thursday.
With U.S. and European manufacturing sectors still contracting and shedding jobs, albeit at a slower pace, some investors worry that markets may have been too aggressive in factoring a global economic recovery before the end of this year.
After rounds of furious interest rate cuts and head-spinning bailout and spending packages, authorities around the world have shifted to a "wait and see" mode, hoping the massive stimulus will gradually work its way through the economy.
THRIFTY CONSUMERS
In that vein, the European Central Bank is expected to hold rates at record lows and refrain from major new policy initiatives when it meets in Luxembourg later on Thursday.
Analysts expect the ECB to say it sees some faint signs of recovery, though its council member Axel Weber said the world economy would not return to growth before mid-2010.
The Swedish central bank is also seen keeping rates at record lows although it may it may reveal plans for unconventional steps to help its economy climb out of a deep recession.
Policymakers and economists worry, however, that even as companies get ready to crank up production, tax cuts and handouts may have only a fleeting impact if consumers continue to fear for their jobs and incomes.
In the United States alone, the crisis wiped out at least $15 trillion in wealth and with jobless rate approaching 10 percent consumers are bound to spend less for years to come, said Bill Gross, who runs the world's biggest bond fund Pimco.
