Abu Dhabi

Popular concern over the role of sovereign wealth funds is certainly understandable. In the aftermath of the US subprime lending fiasco, sovereign wealth funds have bought considerable stakes in some of America's most recognized firms. The pace of these high profile purchases seems to be about one per week. This has resulted in a field of alarmist commentary that ranges between the assertion that America is being "bought up" by Abu Dhabi, Singapore and China, and the assertion we are witnessing the eclipse of the American phenomenon.

Opec countries meeting in Saudi Arabia clashed on Friday over the declaration to be made by leaders at this weekend’s summit, as Venezuela and Iran pushed for a statement on the impact of the weak dollar on the group’s revenues. The disagreement was revealed when a ministerial meeting Friday afternoon, supposed to be in closed session, was accidentally broadcast live to reporters.

It seems that worries over China dumping its reserves of a trillion, or so, American dollars are just the tip of a much larger iceberg. Sovereign wealth funds, opaque investment funds controlled by cash-rich governments like China, Abu Dhabi and Russia, are set to buy more emerging markets currencies, at the expense of their more established counterparts. In other words these funds, which have reserves totaling $2.3 trillion, are set to sell off more American dollars, euros and British pounds.