Dollar discomfort thrust onstage for Italy summit

The dollar lost a cent versus the euro at one stage last week when Reuters reported sources as saying Beijing wanted the matter debated.

One official, speaking anonymously, went as far as to say China might push for a reference to the matter in the published statements from the meetings.

Other sources involved in preparation of the meetings said Brazil and India backed Beijing's call for debate but there was consensus among the G8, at least, that nothing of significance could or should materialize at this stage.

If China insisted on something being put into a statement, it would surely be with references worded obscurely enough to be "meaningless," one official who spoke to Reuters said.

"In the midst of what is still a significant global recession, it's important that we aim for stability, and stability has been based on the U.S. dollar as the global currency," Canadian Finance Minister Jim Flaherty said on Friday.

Beijing, equally, has reason to move carefully, even if Zhou Xiaochuan, head of the Chinese central bank, launched the debate last March when he said the SDR, the International Monetary Fund's unit of account, might one day displace the dollar.

Some diplomats and bankers suggest Zhou's primary aim was to highlight attention on concern expressed by Premier Wen Jiabao about the safety of China's huge dollar holdings -- at risk if U.S. policy turns to greater tolerance of inflation.

Bankers reckon China holds perhaps 70 percent of its $1.95 trillion in official currency reserves in the dollar.

Marco Annunziata, economist at UniCredit bank, feels Beijing may want the issue discussed in Italy but will not push to hard.

"FX markets will of course wonder till the last minute whether the BRICs or China alone will mount a serious challenge to the dollar, but are bound to be disappointed," he said.

In L'Aquila, Italy is also pressing leaders to back a global charter for business and finance, a sprawling compendium of best practices in labor, taxation, investment and myriad other domains where international organisations have produced thousands of mostly voluntary guidelines over the decades.

Germany's Merkel wants something of the same sort but it is far from clear, officials say, that the gathering will reach anything amounting to a definitive decision on the charter the Italians calls the Lecce Framework.

(With reporting by Reuters reporters worldwide; editing by Simon Jessop)