Economists from Eurizon SLJ Asset Management have warned that the US dollar’s role as a global reserve currency is at risk of diminishing quickly, mainly due to the sanctions imposed after the conflict between Russia and Ukraine.
Experts on the U.S. Dollar’s Decline in its Global Reserve Currency Status
In a recent report, Joana Freire and Stephen Jen from Eurizon SLJ Asset Management stated that the US dollar’s share of international reserves has dropped from two-thirds in 2003 to 47% in 2022. As the strategists highlighted:
This 8% decrease in only one year is considerable, amounting to 10 times the average annual erosion in the USD’s market share in the preceding years.
The USD’s decline as the world’s reserve currency is largely due to the sanctions imposed as a result of the Ukraine conflict, according to the strategists. They explained that the U.S. and its allies “startled large reserve-holding countries” with their hard-line stance against Russia, leading Moscow to rely more heavily on the Chinese yuan.
However, the Eurizon SLJ team believes that the US dollar will likely remain the dominant currency for some time. Citing data from the Triennial Central Bank Survey conducted by the Bank for International Settlements (BIS) in 2022, they indicated that the dollar’s share of currency turnover had risen from 85% in 2010 to 88% a decade later.
What do you think the future holds for the US dollar as the world’s reserve currency? Share your thoughts in the comments section below.
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