by Tomasz Janowski

CHINA said the dollar would 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.

In Asia and Europe, economic leaders expressed concern that banks, the seat of a global financial crisis now shaking world commerce, were slow in restoring lending to revive growth.

Beijing has floated the idea of an alternative to the dollar as global reserve currency as part of reforms of a financial system found wanting in the worst crisis in decades. France and Russia have urged discussion of the matter at this week's G8 summit, 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 reform in the current regime.

'The US 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.

His views were echoed by central bank economist Wang Xin, who said it would be impossible 'to get there in one step'.

Russia has been promoting the notion of multiple reserve currencies in recent months. US President Barack Obama, who arrives in Moscow on Monday, is widely expected to discuss the matter at talks with Prime Minister Vladimir Putin.

The debate is highly sensitive in financial markets wary of risks to US asset values. Last week the dollar dipped briefly after suggestions its role may form a part of the agenda of the July 8-10 summit.

Reassurances by China, which holds an estimated 70 per cent of its $1.95 trillion in official foreign exchange reserves in the greenback, helped the US dollar inch higher in very thin Asian trade on Monday.

Tight Financing

The US 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 US jobs report.

European stocks slipped 1.5 per cent in early trade, reflecting a similar fall in Japan's Nikkei on doubts over the strength and staying power of a global recovery.

Bank of Japan Governor Masaaki Shirakawa, reflecting concern expressed also by European Central Bank governor Jean-Claude Trichet at the weekend, said finances remained constricted.

'Many firms still face a tight funding and lending attitude from banks, although there are signs that the trend has stopped deteriorating,' Shirakawa said.

The comments reinforced views that the Bank of Japan will extend its emergency corporate financing support beyond its September deadline.

In its first ever profit guidance, the world's top maker of memory chips and flat screen TVs, Samsung Electronics, forecast second-quarter earnings well above market estimates, boosting shares by more than 4 per cent.

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 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 US 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 US 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 US housing bubble has spurred worries about the US economy's health and revived calls for a new currency system that would reflect the shifting balance of power in the globalised economy.

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.