Will the US dollar’s slide erode its status as the world’s currency of choice?
- In October, the US dollar lost its crown as the world’s most used global payments currency, slipping behind the euro for the first time since August 2013
- Its share in global currency reserves is still dominant, but geopolitics and near-zero US interest rates have countries and investors looking for alternatives
The US dollar’s sharp decline this year has raised questions about it losing its status as the pre-eminent reserve currency and dominant force in the global payments.
The US dollar has weakened by 13 per cent against a basket of major currencies since its peak in March, fuelled by worries about expansionary US fiscal and monetary policies and a ballooning current account deficit in response to the Covid-19 pandemic.
While an imminent collapse is very unlikely, there is risk of a prolonged downward adjustment in the perception of the US currency, analysts said.
Underlying geopolitical risks and changing international dynamics could, over time, undermine the US dollar’s leading position in today’s foreign exchange trading, cross-border trade transactions and international debt markets, they warned.
There are certainly other liquid currencies out there that will increasingly be used for payments
