(iv) Gain loss on exchange arises from transactions conducted in currencies other than euros, for the general and other Headquarters funds and the revaluation of assets and liabilities held in local currencies.

On the one hand, pegging local currencies to the dollar renders monetary policy completely ineffective, as in a fixed exchange rate regime.

But it is becoming increasingly difficult for factories in the region to remain in business under conditions of weak global demand and strong local currencies.

Likewise, international oil companies sell most of their oil in dollars, but they operate in various countries and pay some of their costs in local currencies.

Exchange of currencies

Ideally, Asian currencies would rise much more than 15 while European currencies would rise less.

Moreover, some emerging market currencies are joining the club of international currencies for the first time.

Some countries devalued their currencies.

Wanted Chinese Leadership on Currencies

Other emerging markets growth prospects are even worse not least because of low commodity prices. As a result, these countries can expect lower capital inflows, again making for weak local currencies.

A World of Multiple Reserve Currencies

That is also true of currencies.

Efficiency dictates the use of fewer and larger currencies (and foreign investors, understandably wary of weak and volatile currencies, demand it).

Tensions are rising over currencies as well.

But that's just part of the story. You have a similar trend with currencies currencies going through an extreme time of stability.

This is particularly true with respect to lending in foreign currencies to economic agents that do not have revenues in those currencies.

However, some claims were presented in other currencies, and some others were presented in United States dollars after conversion from other currencies.

depreciation of nonconvertible currencies. In 2004, the amount written off plus the adjustment for overvaluation of cash held in nonconvertible currencies totalled 2.7 million.

Moreover, the eurozone itself is a mini gold standard, with heavily indebted members unable to devalue their currencies, because they have no currencies to devalue.

So products were developed that allowed investors to borrow easily in several currencies at once and invest in a portfolio of high interest rate currencies.

To be sure, all three currencies have their critics.

Since then, most emerging market currencies have rebounded sharply.

Given that the renminbi s real and expected rates of return are higher than the real rate of return of other currencies, it has become a positive carry against foreign currencies, reinforcing the tendency to hold assets in renminbi and liabilities in foreign currencies.

These countries have found themselves on the receiving end not only of a correction in commodity prices and equities, but also of a brutal re pricing of currencies and both local and foreign currency fixed income assets.

And floating and fixed exchange rate regimes coexist uneasily, because volatility tends to affect the floating currencies (often the euro, and recently the Latin American currencies).

Will exchange rates between the major currencies be dangerously unstable? Will those responsible for managing central bank reserves, seeking to maximize returns, shift erratically between those currencies?

Prohibition of certain transactions for prudential reasons also makes sense, particularly for borrowing in foreign currencies by economic agents that do not have revenues in those currencies.

The regular resources cash balance at the end of 2004 was 329 million, consisting of 318 million in convertible currencies and 11 million in non convertible currencies.

Currencies fell, interest rates rose, and credit default swaps soared.

In order for some currencies to depreciate, others must appreciate.

Table 5 Non convertible currencies held at 31 December 2004

They can be used only by converting them into one of four currencies, at which point they begin to carry interest at those currencies combined treasury bill rate.

However, for expenses incurred in specific currencies as determined by the International Civil Service Commission, the maximum amounts mentioned in all paragraphs below shall be established in those currencies.

In fact, this will happen whatever the exchange rate between currencies.

Countries running surpluses must adopt expansionary policies and appreciate their currencies.

One after another, they abandoned the gold standard, depreciating their currencies.

The amount fluctuates as many frozen accounts are in other currencies.

After all, we live in a global system in which different countries use different currencies, which implies that residents and non residents have asymmetric demands for assets issued in those currencies.

Some worry about the stability of this world of multiple international currencies.

Apart from China, central banks don t intervene to protect their currencies anymore.

Some Asian economies, especially China, are also attempting to internationalize their currencies.

There are two alternative and sharply contrasting approaches to getting currencies right.

Finally, global uncertainty about currencies stands in the way of a solution.

The Bank should be able to work with them in the absence of sovereign guarantees, and increase its loan offerings in local currencies, since these partners cannot afford currency risk. To further crowd in the private sector, insurance and guarantees can help.

However, in areas where the above mentioned expenses are incurred in specific currencies, the maximum amounts of admissible expenses expressed in these currencies shall be those set by the International Civil Service Commission.