Geithner-Dollar to remain world's key reserve currency

By Glenn Somerville

ABU DHABI (Reuters) - U.S. Treasury Secretary Timothy Geithner said he was reassured during a visit to the Gulf that the U.S. dollar will remain the region's main reserve currency and said he wanted to find ways to reduce oil price volatility.

Interviewed on Al Arabiya television on Wednesday near the end of a two-day swing through Saudi Arabia and the United Arab Emirates, Geithner also renewed a pledge to back a strong dollar in an apparent bid to calm Mideast investor worries.

"It is the policy of the United States and it will remain the policy of the United States to remain committed to a strong dollar," he said, adding he had heard no concern about the dollar's status in talks with Gulf business and government leaders.

Geithner's meetings in the United Arab Emirates included sessions with leaders of the world's largest sovereign wealth fund, Abu Dhabi Investment Authority, which has taken losses during the past two years of financial crisis on its U.S. investments.

On balance, Geithner claimed that Gulf officials were supportive of the Obama administration's efforts to restore U.S. growth and still had faith in the dollar's value.

"My view, and this is the view I heard expressed here, is the dollar ... will remain the principal reserve currency," he said.

Five of the six Arab states that comprise the Gulf Cooperation Council -- Saudi Arabia, the UAE, Bahrain, Qatar and Oman -- peg their currencies to the dollar. The sixth, Kuwait, uses a basket heavily weighted in dollars.

In response to questions, Geithner said he was not concerned about the level of Saudi holdings of U.S. Treasury securities and noted that when risks are high investors generally want the safest securities they can find.