Finding a valid replacement currency is going to be extremely challenging, say funds
Dethroning the dollar is easier said than done.
There are simply “no other options at this stage in the game” for currency alternatives to the greenback, said Mark Mobius, a four-decade markets veteran and founder of Mobius Capital Partners. “The dollar is still strong and will probably get stronger if tensions continue to escalate.” While the Central Bank of Russia had made inroads in reducing its dollar holdings in favour of alternatives such as gold, recent events show that its efforts may have been in vain, according to Agnes Belaisch, chief European strategist at Baring Investment Services in London.
At a Senate Banking Committee hearing this month, Fed Chair Jerome Powell said the war in Ukraine may accelerate Beijing’s efforts to develop alternatives to dollar-dominated international payments infrastructure. Goldman Sachs sees the yuan overtaking the yen and pound to become the world’s third-largest reserve currency by 2030, and Morgan Stanley sees the Chinese currency accounting for up to 10% of global forex assets in the coming decade.
The yuan’s share of payments over the Swift global system stands at just 3%, compared with 40% for the dollar and 37% for the euro.
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