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Role of US Dollar Could be Changing

The U.S. dollar has remained the world's reserve currency since 1944 and is used in roughly half of all financial transactions, according to Kellogg Insight. But the dollar's status in global trade may be in jeopardy as countries begin diversifying their reserves with alternative currencies as a form of economic protection. "We might see an erosion of the role of the dollar in world affairs," Sergio Rebelo, a professor of finance at Kellogg, said in a recent article.

The war in Ukraine and the sanctions that followed also sparked questions about whether or not the dollar is losing dominance. "It used to be as simple as 'our currency, your problem.' Now it's 'our commodity, your problem,'" Zoltan Pozsar, a bond market strategist at Credit Suisse, wrote in March.

However, some economists say more currency diversification does not equate to danger for the dollar. "The reality is the dollar can't be avoided and it will remain the dominant currency in trading and transactions," Megan Greene, Kroll Institute's chief economist, wrote in a Financial Times op-ed.

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Thursday, 01 December 2022

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