A G8 meeting will take place in Italy next week (Wednesday to Friday), and interest in the FX market is centring on the Chinese delegation led by President Hu Jintao. In the past week the financial media have reported that China wants a discussion about the USD’s role as reserve currency. Understandably the Chinese are worried about what the US imbalances will mean for the USD in the long term, especially considering that the bulk of China’s FX reserves are invested in USD assets.