Dollar's status as reserve currency to endure - Wells Fargo
Investing.com - The move by U.S. authorities to confiscate Russian assets could add to recent efforts to diversify from the dollar, but the greenback is still likely to remain the global reserve currency for the foreseeable future, according to Wells Fargo.The United States and its allies prohibited transactions with Russia's central bank and finance ministry and blocked about $300 billion of sovereign Russian assets in the West, following Russia’s invasion of Ukraine.
That would have a very limited impact on the dollar in its role as a reverse currency, but would likely attract the attention of China given the Asian giant’s material exposure to the U.S. dollar. “We also had doubts that Middle East energy exporters, most of whom operate under a fixed exchange rate regime to the U.S. dollar, would be willing to potentially put currency pegs at risk by generating less dollar revenues,” analysts at Wells Fargo said, “and a BRICS common currency, in our view, is unlikely to gather momentum.
The Japanese government bond market has been, and continues to be, significantly distorted by the Bank of Japan, and Chinese government bonds, capital controls and convertibility concerns as well as the managed exchange rate regime of the renminbi should provide disincentive for reserve managers to allocate currency holdings toward Chinese assets.
"The most discussed competitor is China, and we do expect a modestly more global role for CNY,” analysts at Morgan Stanley said, in a note last month.
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