US Dollar Is under Fire from Rival Nations. What Happens to Markets If The Greenback Loses Its World Dominance?
The comments below are an edited and abridged synopsis of an article by Gold Eagle
Is the US dollar in danger of losing its crown? Not yet, but the rapid unwind of last year’s rally in the dollar, combined with efforts by Beijing and others to ease dependence on the buck, have helped speculation that the greenback’s dominance over international trade and finance may be moving toward its twilight.
Talk about de-dollarization has intensified and Wall Street analysts have joined in, publishing reports forecasting more competition for the dollar in trade and global reserves alongside assessments about where the dollar is heading, and how the adoption of central bank digital currencies might shake things up.
Many currency strategists and economists have pushed back against the idea that the dollar is close to shedding its reserve status, citing its dominance in global trade and as a widely used reserve asset by central banks.
The dollar’s sharp appreciation last year caught many currency strategists off guard, as has its reversal over the last six months.
After hitting its strongest level in more than two decades in late September, the ICE US Dollar Index has fallen more than 10%. The dollar hit its lowest level against the euro in more than a year recently, with the shared currency trading at roughly $1.10.
As a result, the dollar has been the worst-performing G-10 currency over the past month.
De-dollarization is back in vogue less than a year after the 50th anniversary of the collapse Bretton Woods. Under that agreement, a gold-backed dollar had a central role in the postwar economy.
Up for discussion: A blistering rally unravels; shifting tides; and TINA (there is no alternative).