Threat to US Dollar’s Global Dominance: Bloomberg

Before Covid-19 emerged, the US dollar’s fundamentals were strong, but imbalanced: The dollar’s share of global transactions grew as the country’s share of worldwide gross domestic product declined. Some analysts suggest that US policymakers abuse the dollar’s dominance with overspending and massive debt. Relying on the dollar may have become habit for some countries, explains Joe Weisenthal for Bloomberg, warning that the pandemic could change old ways. “The failure of rich countries (notably the U.S.) to source basic equipment has increased calls for domestic manufacturing and placed a renewed focus on the resilience of supply chains instead of their optimization or efficiency,” he writes. “An inward turn by the U.S. in manufacturing goods would deprive export-oriented economies around the world of a supply of dollars.” Likewise, US consumer spending could slow. For now, other currencies like the euro or the renminbi are not ready to step up as substitutes. Weisenthal suggests that the dollar’s decline will be gradual, with countries holding more of their own currencies to escape global volatility or joining regional currency blocs. He concludes, “if countries prioritize resiliency over scale and efficiency, all sorts of new options will emerge that depend less on the dollar.” – YaleGlobal

Threat to US Dollar’s Global Dominance: Bloomberg

Demand for the US dollar may decline; other countries may consider funding themselves in local currencies to maintain stability for future crises
Joe Weisenthal
Wednesday, May 20, 2020

Read the article from Bloomberg about possible impact of the Covid-19 pandemic on the US dollar.

Joe Weisenthal co-hosts Bloomberg TV’s What’d You Miss? and is news director for the Americas at Bloomberg.

 

Currency Composition Foreign Exchange Reserves: 2019 Q4, Total US$11,830 Billion:   (billions) US$ $6,746  Euro	 $2,276  Renminbi $218  Yen  $631  Pounds $512  Canada$ $208  Other $488  Unallocated	$751
(Source: International Monetary Fund)

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