Sick US dollar 'threat to poor states'

businessday.co.za: Developing countries that have amassed large US dollar reserves face a growing threat of big losses from a sudden decline in the dollar, the World Bank warned yesterday.

In its 2005 Global Development Finance Report, the bank identified the "gravest risk" for emerging markets as a deep and disorderly dollar decline. This could create volatility, including a dollar collapse below what the bank's economists see as its long-term equilibrium level.

The result, it said, could be "a costly restructuring of world industry that would have to be undone in following years as the dollar returned to its equilibrium level".

But even in the event of a continued steady decline in the dollar, the bank warned that countries with big dollar reserves faced capital losses, following the pattern of the past two and a half years. Link