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Dollar vs RMB
The dollar could weaken against other currencies and lose its status as a world reserve currency.
The collapse of the dollar is predicted almost every year. This is a popular conspiracy theory. But now they are talking quite seriously about the dollar’s loss of status as a world reserve currency.
For example, Bloomberg experts predict that two world currencies could soon replace the dollar. In your opinion, these are Norwegian kroner and Australian dollars.
But there are also more traditional contenders for the number 1 coin title.
The euro goes up
In 2020, the euro was up 5.5% against the US dollar. At the end of October, it was the European currency that became the most popular for international payments. The dollar lost leadership for the first time since February 2013.
It was after this that experts began to talk about the fact that the global state of the US dollar could shake. The dollar could fall 20% next year if Covid-19 vaccines go mainstream and help jump-start global trade and economic growth, experts predict.
“The second wave of the virus is currently affecting Europe more than the United States. But that scenario could change with the onset of winter, especially if the post-election interregnum in the United States paralyzes macroeconomic and health policies. And while the United States still has enormous potential to provide much-needed assistance to workers and small businesses in the aftermath of the devastating pandemic, the growing share of US corporate and government debt in global markets indicates long-term vulnerability. ”Says the Harvard University economics professor and former chief economist. International Monetary Fund Kenneth Rogoff.
There is a fundamental long-term mismatch between the growing share of US debt in world markets and the shrinking share of US output in the world economy, he said.
Yuan instead of dollar
As China and the United States continue to fight, tensions in technology and finance have spurred Beijing’s efforts to internationalize the yuan.
It is currently the sixth most popular currency in international settlements and is used to serve approximately 20% of China’s trade.
The renminbi’s share of global reserves has also increased, from 1% in 2016 to about 2% today, according to the International Monetary Fund.
China’s growing influence through its massive Belt and Road Initiative (BRI) is one factor that could lead to wider use of the yuan. The ambitious BRI project aims to create a complex network of rail, road and sea routes from China to Central Asia, Africa and Europe. It also aims to promote trade.
“Thanks to the China Belt and Road Initiative, its influence in the Eurasian region and Africa is growing as it links many countries to their economic system, paving the way for the yuan to find its place every time. more on global commercial contracts. ” – says Sven Schubert, senior investment strategist at Vontobel Asset Management’s European arm.
In addition, China and Russia have partnered to reduce their dependence on the US dollar.
According to the latest Bank of Russia annual report, the country has increased the yuan’s share of its reserves, from more than 2% in 2018 to more than 14% in 2019. It also reduced its share in US dollars from about 30% to 9.7% during the same period.
The alliance has caused the dollar’s share of China-Russia trade to fall below 50% for the first time in the first quarter of 2020, Schubert said. According to him, in general, during the last 5 years, the participation of the dollar in these trade agreements fell from 90% to 46%.
