U.S. Dollar's reserve currency status still secure
|Summary
Over the last few weeks, headlines around the U.S. dollar losing its global reserve currency status have become widespread and captured attention. In our view, the U.S. dollar is not on the brink of losing global reserve currency status at any point in the foreseeable future. The dollar meets all the characteristics of a reserve currency, and is still the dominant currency in the global payments' marketplace as well as the currency of choice for FX reserve managers. While the FX reserve allocation to the dollar has declined over time, we believe this trend is a product of one-off developments and not necessarily a movement to shun the greenback. Going forward, we believe the dollar will maintain its status as the global reserve currency as EU fragmentation risks will prevent the euro from gathering momentum, a distorted Japanese Government Bond market counters the yen, and convertibility challenges limits the rise of the renminbi for the time being.
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