Philippine Secretary of Finance Cesar Purisima said U.S. failure to reach a debt deal is causing a “loss of confidence” in the dollar and could “accelerate the search for an alternate reserve currency.”
With no credible alternative to the dollar, however, “in the short run gold and oil prices will go up. In case of default, they’d go through the roof,” Mr. Purisima said in a telephone interview.
Mr. Purisima said U.S. leaders are “missing the point” and are endangering the dollar’s preeminent status, used as the default currency across the globe in trade and finance.
“Once people lose confidence in the U.S. dollar, and they are starting to, it will affect them more than what they are fighting about now,” he said.
Investors sold the U.S. dollar against nearly every other currency Tuesday after speeches by President Barack Obama and House Speaker John Boehner highlighted how far apart the two sides remain in crafting a compromise that would enable the U.S. to raise its debt ceiling and create a plan to reduce the government’s borrowing needs over the long term.
He said the talk of default is “upsetting the global financial system. It’s a possibility you just don’t want to think about. Now people are concerned. We are concerned.”
The Philippines holds $69 billion in foreign-currency reserves.