Despite the consistent efforts of US dollar alternatives to derail the USD and trigger de-dollarization, a new study reveals that the American currency is still standing tall amid the grueling pressure. A novel study conducted by the Atlantic Council Geoeconomics Center revealed how the USD indisputably remains the king of currencies despite being surrounded by external forces vying to hammer the US dollar down.
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USD: An Indisputable Currency King
The study elaborates on a few pointers indicative of the US dollar’s unmatched popularity and success on a global scale. The analysis shares how the US dollar remains unscathed in terms of reserves, trades, and transaction metrics, signaling a strong foothold in all the areas mentioned above.
The reports later elaborated on how the USD is firmly rooted in its cause and will remain steadfast in its approach to boasting its status as the world’s reserve currency.
“The dollar’s role as the primary global reserve currency is secure in the near and medium term. The dollar continues to dominate foreign reserve holdings, trade invoicing, and currency transactions globally. All potential rivals, including the euro, have a limited ability to challenge the dollar in the immediate future.”
Despite the increasing multipolar narrative taking shape, the report adds that the “so-called USD alternatives” do not stand a chance against the American currency. Embellishing the statement with more factual data, the report adds how increasing BRICS pressure, coupled with China’s efforts in de-dollarization, may prove to be futile in the long haul.
“Negotiations around an intra-BRICS payment system are in the early stages, but the members have reached bilateral and plurilateral agreements with one another, with a focus on cross-border wholesale central bank digital currency (CBDC) and currency swap agreements. These agreements are likely difficult to scale due to regulatory and liquidity issues but may form the basis for a currency exchange platform over time.”
What De-Dollarization: US Dollar (USD) Competitors Bite The Dust
The Atlantic Council report further emphasized Yuan’s expansion, which is often dubbed a capable competitor to the USD. Speaking about Yuan derailing the USD, the report adds how the global renminbi share in foreign currency has noted a sharp decline from 2.8% to 2.3% as of late. Dubbing it a “risky currency,” the report details how the Yuan has a long way to go when it comes to toppling the might of the US dollar.
“In the last quarter of 2023, the share of renminbi in global foreign currency reserves dropped to 2.3%. From the peak of 2.8% in 2022 despite Beijing’s active support of renminbi liquidity through swap lines. Reserve managers might be perceiving the renminbi as a geopolitically risky currency. Because of concerns about China’s economy, Beijing’s position on the Russia-Ukraine war, and increased tensions with the US and G7.”
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Apart from Yuan, the report also deems the euro a risky currency. The report dubbed it a currency unable to overpower the USD in the long run.
“While the euro was once considered a competitor to the dollar’s international role, it continues to lag far behind and is weakening as an attractive reserve currency. The 2022 sanctions on Russia signaled to reserve managers that the euro exposed them to similar geopolitical risks as the dollar. Those looking to de-risk away from the dollar have turned to gold.”