The US dollar has become one of the most scrutinized currencies in the world. With elements like de-dollarization and movements propagating the US dollar dumping catching pace, it’s evident how the USD has now attracted diverse inimical foes.
With alliances like BRICS and ASEAN pioneering a way to ditch the US dollar by promoting local currency usage, will they ever succeed in their endeavours to dump the US dollar? It does not appear so.
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Why The US Dollar Is Indestructible
Constant Price Volatility And Consumer Faith
For a currency to collapse, it needs constant price volatility. Above all, it collapses when consumer faith in the currency dissipates holistically.
In simpler terms, currencies suffer gravely when they note a considerable drop in their usefulness or their store of value-related metrics. The developments above can spur for multiple reasons, primarily political and economic instability.
While it’s true that the US dollar is currently inching towards embracing such factors (de-dollarization movements), it will take more than that to kill a phenomenon like the USD in a world that relies on it wholeheartedly.
Reason #1: USD’s Prevalence and Demand
One of the primary reasons the US dollar is practically impossible to destroy is its perennial demand and prevalence. The dollar’s demand is very high, primarily fueled by its global positioning as the leading economic leader.
While currencies like the Swiss Franc and the Kuwait Dinar trend high against the US dollar, the fact that the USD prevails and is used globally for multiple transactions makes it indestructible and irreplaceable in the long haul.
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Reason #2: It’s Status As Reserve Currency
The US dollar constitutes 58% of worldwide currency reserves, making it an important component of the world economic structure. While the US dollar may continue to attract capable foes, considering its strong foothold in the global financial space, it will ultimately be tough to derail it.
“Which currency would you want to own when global stock markets start to fall and the global economy tends to head into recession? You want to be positioning in US dollars because that has historically been the exchange rate reaction to those kinds of events.” James Lord, the MG head of FX strategy for emerging markets, said in a recent podcast.
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