Dollar rises as Russia backs reserve currency status

By Wanfeng Zhou

NEW YORK (Reuters) - The U.S. dollar rose broadly on Monday after Russia expressed confidence in the greenback as the world's reserve currency, while concerns about the euro zone economy undermined the euro.

The single European currency fell below $1.38 to its lowest level in more than three weeks after the European Central Bank said euro-zone banks will probably need to write down another $283 billion.

Speaking on the sidelines of a Group of Eight finance ministers in Italy, Russia's Finance Minister Alexei Kudrin said the dollar's role as the world's main reserve currency is unlikely to change in the near future.

The comments followed news from Russia last week that it would cut the share of U.S. Treasuries in its reserves and alleviated concerns that major emerging market countries may be diversifying away from the dollar ahead of a summit of leaders of Brazil, Russia, India and China (BRIC) in Russia on Tuesday.

"Reserve diversification has really come into question given the complete U-turn in the comments from the Russian Finance Minister," said Kathy Lien, director of currency research at GFT Forex in New York. "We have started the new trading week on a dollar-friendly tone."

The International Monetary Fund on Monday also threw its support behind the U.S. unit, saying the dollar's status as the world's dominant reserve currency is likely to remain.

"Some people have sold the dollar as a result of chatter about diversification away from the U.S. dollar. Now that the finance ministers are standing by the dollar, people are starting to buy the dollar again," UBS currency strategist Brian Kim said.

In early afternoon trading in New York, the ICE Futures' dollar index, a gauge of the greenback's value against a basket of major currencies, rose 1.4 percent to 81.272 .DXY.