There are a number of factors suggesting that, over time, the US dollar may be at risk of surrendering its lead, if not its role, as the world's preeminent reserve currency.
There are a number of factors suggesting that, over time, the US dollar may be at risk of surrendering its position as the world's global reserve currency, argues Fitch Ratings analyst James MacCormack.China and the euro zone have been actively touting their currencies as reserve and transaction substitutes.
Sanctions do the same, and since they may effectively preclude dollar settlement, the implications for the dollar are more acute. In addition to the Treasury Department's list of 6,300 Specially Designated Nationals and more than 20 countries against which some type of sanctions are in place, the extraterritoriality of certain sanctions to affect persons and entities in other jurisdictions extends their reach further.While U.S.
It will be some time before the renminbi or euro poses a serious challenge to the dollar – and they may never do so – but Chinese and European policymakers will be actively looking for opportunities to expand the roles of their currencies, while the US approach toward the dollar in this regard can be characterized as benign neglect, at best.It is difficult to directionally disentangle the causes and consequences that tie the dollar as the world's reserve currency to U.S.
Even so, the supranationals market lacks size, and will never come close to the Treasury market in terms of depth and liquidity, limiting its role in central bank diversification of risk-free foreign-currency assets.Final arguments that the dollar could lose its role as the preeminent reserve currency are based on it already happening, albeit slowly.
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