China's Central Bank Foresees Weak USD, High Commodity Prices in 2011

BEIJING, Mar. 28 -- China's central bank said Friday the U.S. dollar is expected to weaken with the slow recovery of the U.S. economy, and global commodity prices will increase due to greater demand.

Fears regarding the European sovereign debt crisis and the spread of geopolitics could support the U.S. dollar temporarily, according to a report on the 2010 global financial market published by the People's Bank of China (PBOC) on its website.

Liquidity will remain abundant and raise commodity prices in 2011. Extreme weather and political unrest in parts of the world will limit commodity supplies, which could also force prices up, the report said.

As the global economy shakes off the financial crisis gradually, major economies will lift short-term interest rates. However, the increase will not be dramatic as recovery remains inadequate.

Demand for gold will be high as developing and developed nations face the risk of inflation. Prices are likely to drop from a record high.