Kevin Helms
A student of Austrian economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects and the intersection of finance and cryptography.
US Dollar’s reserve currency status is eroding at ‘alarming pace’ – Finance Bitcoin News
Asset management firm Eurizon SLJ’s strategists have warned that the erosion of the US dollar’s global reserve currency status has accelerated at an alarming rate in recent years, particularly after the start of the war between Russia and Ukraine. They noted that the USD has fallen 8% in one year, which is “equivalent to 10 times the average annual rate of erosion of the USD’s market share in the previous years.”
Strategists on the US dollar losing its global reserve currency status
Eurizon SLJ Asset Management says the US dollar saw a significant decline as a preferred reserve currency in 2022 despite its continued dominance in international trade. The firm’s strategists Joana Freire and Stephen Jen wrote in a note Monday:
We believe the erosion of the dollar’s reserve currency status has accelerated in recent years at an alarming rate, particularly since the start of the Ukraine war.
“The dollar suffered a stunning collapse in 2022 in its reserve currency market share, presumably due to its muscular use of sanctions” following the outbreak of the Russia-Ukraine war, the strategists wrote. “Exceptional actions taken by the United States and its allies against Russia have alarmed major reserve-holding countries.” They further noted that Russia became largely isolated from the global financial system after it invaded Ukraine last year, leading the Kremlin to rely more on the Chinese yuan.
The strategists added that the dollar’s share of global reserves has fallen from about two-thirds in 2003 to 55% in 2021 and 47% the following year, emphasizing:
This 8% decline in one year is exceptional, equivalent to 10 times the average annual rate of erosion of USD market share over the previous years.
Nevertheless, the Eurizon SLJ strategists believe that the USD “is likely to continue its dominance as an international currency for some time to come.” Citing data from the Triennial Central Bank Survey conducted worldwide by the Bank for International Settlements (BIS), published last October, they pointed out that the dollar’s share of foreign exchange turnover increased from 85% in 2010 to 88% in 2022.
Do you think the US dollar will lose its status as the world’s reserve currency? Let us know in the comments section below.
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