18 February 2020
The Dollar as the Dominant Global Reserve Currency: A Threat to Financial Stability?
Executive Summary
Today, the US dollar is the world’s dominant, if in practice also the sole, reserve currency. This makes financial stability across the world hostage to swing in the dollar and hence to America’s economic fortunes. How Asian economies manage this tension, and whether an alternative reserve currency will emerge to buffer the safety-net, will be important determinants of their convergence with advanced economies.
The understanding of this challenge has to start with the renminbi and its chances of rivalling the dollar because, just as China’s dominance in global trade defined the last two decades, its emergence at the heart of global finance could define the next two decades.
Executive Summary
Today, the US dollar is the world’s dominant, if in practice also the sole, reserve currency. This makes financial stability across the world hostage to swing in the dollar and hence to America’s economic fortunes. How Asian economies manage this tension, and whether an alternative reserve currency will emerge to buffer the safety-net, will be important determinants of their convergence with advanced economies.
The understanding of this challenge has to start with the renminbi and its chances of rivalling the dollar because, just as China’s dominance in global trade defined the last two decades, its emergence at the heart of global finance could define the next two decades.
