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中國金融之全球戰略及戰況 ––– 開欄文
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瀏覽2,760 ｜回應9｜推薦1 |
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本欄原於2023/05/28建立，後於2025/07/25改名為《開欄文》；並在標題中增加《美元和人民幣爭霸記 – 開欄文》。2025/11/30轉載《中國全球金融佈署下香港戰略地位》一文後，原《開欄文》標題已無法概括全欄內容；故再度改寫，並對整欄做了調正。
1) 原《開欄文》就瑞普利教授大作的「引言」仍附於該文之前，將在2025/12/11重行登出。
2) 《人民幣無法取代美元原因》及其《讀後》兩文(2025/05/24在本版刊出)，將分別於2025/12/12和2025/12/13兩天納入本欄；該欄則以「重複登出」理由刪除。
美國100年來，甚至於到今天的不可一世，固然得力於她的航空母艦和海外軍事基地；但美國在全球金融界的地位(美元魅力則是其象徵)，也是美國能呼風喚雨的底氣和本錢。
中國因國力和國際地位的提升，軍力」、「高科技」、「兩岸關係」、「外交關係」、「地緣政治」、乃至於「經濟發展」等等面向，已經不足以了解「中國之強大」。今後，人民幣勢必成為中、美雙方在國際舞台掰手腕的重頭戲之一。將此欄改名，此其時矣；也修正了我的見識不足。
請參見此欄、此欄、和從根兒上理解美元【湯山老王】(視頻)。
造成不便，尚請見諒。 – 2025/12/10
本文於 修改第 12 次
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美元獨霸地位的黃昏時刻 ––– John Rapley
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** 本文在2023/05/28已經單獨刊出。後於2025/07/25改為《美元和人民幣爭霸記 – 開欄文》的一部份。該欄標題於2025/12/10改為現在名稱，目前的「開欄文」做了簡短說明，請參考。因此，瑞普利教授大作已不宜併入該文；故重新單獨刊出。造成不便，敬請見諒。**
美元和人民幣爭霸態勢是目前熱門話題之一；轉載此文謹供參考。
瑞普利教授在《獨立思考》雜誌這篇文章，從歷史和經濟兩個角度比較羅馬和美國霸權的興、衰過程，來看美元和人民幣角力的未來走向。他在其大作中雖然提到聯合國貨幣金融會議，很可惜我看不出他文章標題和內容的一致性與相關性。其次，從瑞普利教授的語調和用字遣詞看，下文的意識型態含量超標。不過，這篇大作仍有可欣賞和值得參考之處。
聯合國貨幣金融會議的運作和簡史請參閱CEPR上的這篇文章。
關於美元目前地位和未來趨勢，請參考本欄第二篇路透社的報導(2025/05/28)。
The end of dollar supremacy
The West's imperial lifecycle is drawing to a close
JOHN RAPLEY
In January 1999, in a Washington of bustling bars and soaring stock markets, Bill Clinton rose to deliver his State of the Union address. America was so untroubled by threat or misfortune that it had spent the previous year debating the precise significance of fellatio (口交). But Clinton, who had survived the scandal, exuded unshakeable personal and civilisational self-confidence. Declaring “a new dawn for America” and a future of “limitless possibility”, he called on Congress to decide how to spend all the record surpluses the government was soon going to enjoy. America’s only inconvenience, it seemed, was too much money. Today, as America struggles to support a crumbling dollar, marshal allies against Russia, ward off a rising China, it’s easy to forget that barely two decades ago it strode the planet like a colossus.
But pride before a fall has an ancient lineage, and only the arrogance of the historical present could treat American imperial decline as a novel phenomenon, let alone mere metaphor. Some 16 centuries before Clinton, in an uncannily similar setting of domes and colonnades, a Roman orator stood before the imperial Senate to deliver an equally triumphal speech. It was 1 January 399, inauguration day for the latest in a millennium-old line of consuls, the most prestigious Roman office. This year’s candidate was Flavius Mallius Theodorus. After rising to praise his audience — “here I see gathered all the brilliance of the world” — he went on to proclaim the dawn of a new Golden Age, celebrating the unparalleled prosperity of the Empire.
Rome’s rapid comeuppance (報應) is now a historical parable that America can learn from in real-time. Because the rhetoric of Clinton and his ancient predecessor was spoken from atop the crest of the same wave: an identical process of rise and decline which Peter Heather and I, in our new book, call “the imperial lifecycle”. Empires grow rich and powerful and attain supremacy through the economic exploitation of their colonial periphery. But in the process, they inadvertently spur the economic development of that same periphery until it can roll back and ultimately displace its overlord.
America has never thought of itself as an empire, mainly because with the exception of the few islands in the Pacific and Caribbean, it has never accumulated a large network of overseas territories. But this modern European model, in which colonies were (and in a few cases, still are) administered by governors who answered directly to the imperial capital, was but one of many. The late Roman Empire, for instance, functioned as an “inside-out” empire — effectively run from the provinces, with Rome serving more as a spiritual than administrative capital. What held it all together was the shared culture of the provincial nobility that ran it, most of whom has provincial origins but had been socialised into what Peter Heather has called the imperial culture of “Latin, towns and togas (羅馬官服)”.
The American Empire — or more accurately the American-led Western empire — mirrors this confederal model, with an updated cultural-political glue that we might call “neoliberalism, Nato and denim”. Under this regime, the nation-state was primary, borders were inviolable, relatively open trade and capital movement prevailed, governing elites were committed to liberal principles, and bureaucracy was based on increasingly standardised education systems (with economics training assuming an increasingly central role as the century progressed). But since its establishment in 1944 at the Bretton Woods conference, its fundamental economic model has been in the timeless imperial mould: exploitation of the periphery to the benefit of the imperial core.
The great wave of decolonisation that followed the war was meant to end that. But the Bretton Woods system, which created a trading regime that favoured industrial over primary producers and enshrined the dollar as the global reserve currency, ensured that the net flow of financial resources continued to move from developing countries to developed ones. Even when the economies of the newly-independent states grew, those of the G7 economies and their partners grew more. And while the treaty arrangements that cemented this system were periodically updated at international summits, even then the US and its main trading partners would typically draft a deal for sign-off by everyone else. As a result, the gap between rich and poor countries grew bigger than ever.
Clinton was speaking at the all-time peak of this American imperial order. Two years earlier, a financial crisis that had begun in Asia had ricocheted across the developing world. And when protesters filled streets and governments across the Global South collapsed, the rich in developing countries panicked and sent their money into the safe haven of US Treasury paper. That influx of cash sent the late Nineties US economy into overdrive, creating the abundance that Clinton took to be endless.
In fact, as he was speaking, the overall flow of global capital had already begun moving the other way. By this time, quietly but steadily, developing countries like China and India had shaken off the torpor of earlier decades and were starting to grow in leaps and bounds. The brief recessions induced in developing countries by the Asian Crisis and the consequent boom in the West obscured the fact that the really dynamic economies of the world were now in what was called the Third World. Once the protests died down and normal business resumed there, investors in the developing world — followed by fund-managers in Western countries — sent their money back to the growing economies of the global periphery.
In the Roman Empire, peripheral states developed the political and military capacity to end Roman domination by force. In the modern case, the conflict was fought through diplomatic, economic and political channels. The year of Clinton’s panegyric (頌詞) now looks pivotal — not only for the changing capital winds, but because of what happened at that year’s World Trade Organization summit in Seattle. After decades in which they’d more or less signed off on done-and-dusted deals, delegations from some of the big developing countries got together, refused to go along and brought the negotiations to a halt. As their diplomatic and political capacity rose to match their economic heft, developing countries were now demanding, and getting, better deals.
The Third World was rising, and it quickly showed in the economic data. On the eve of the millennium, the cusp of its supremacy — a supremacy no other empire in history had come remotely close to matching — the West accounted for four-fifths of the global economy. Today, that’s down to three-fifths, and falling. The fastest-growing economies in the world are now all in the old periphery; the worst-performing economies are disproportionately in the West. These are the economic trends that have created our present landscape of superpower conflict — most saliently between America and China. A once-mighty empire is now challenged and feels embattled. Taken aback by the refusal of so many developing countries to join in isolating Russia, the West is now waking up to the reality of the emerging, polycentric and fluid global order.
These trends are only set to continue. But this is where America and Rome diverge. The Roman Empire existed at a time where there was one fixed factor of production: land. The economy was therefore necessarily steady-state and overwhelmingly agricultural. For the periphery to rise, the core had to fall, as the barbarian invaders seized physical Roman real estate. But in the modern world, where continued technological progress means economies can keep moving forward, if more slowly, decline may only need to be relative. The West can continue to grow, and to play a pre-eminent role in global governance.
But meek acceptance isn’t what builds empires in the first place. The danger is that, obsessed with past glories and tempted by a desire to turn back the clock, Western countries attempt to restore their greatness. Since its own imperial marginalisation, Britain has been possessed by a manic and counter-productive declinism, most recently responding to the 2008 crash with a programme of austerity that has sunk its economy into what may become a permanent decay. America’s interminable annual wranglings over debt ceilings could, if they continue, diminish the attractiveness of the dollar, at a time when developing countries are looking for alternatives.
The fate of the West hangs in the balance, and it must stop drawing the wrong lessons from Roman history, not the least of which is a stubborn refusal to accept a diminished role in its world. After all, the Roman Empire might have survived had it not weakened itself with wars of choice on its ascendant Persian rival. By finding a way to coexist peacefully with its own rival China, however uncomfortable that may be, the US could do itself and the world a favour.
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中國全球金融佈署下香港戰略地位 ---- Matteo Giovannini
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下文可以與本欄與此欄的各篇分析合看。
Hong Kong is China’s most underestimated strategic asset
Hong Kong is not a fading star in Asia’s financial constellation – it’s the quietly rising one China’s global ambitions depend on
Matteo Giovannini, 11/29/25
It has become fashionable in some circles to speak of Hong Kong’s decline. The narrative is familiar: geopolitical tension, competitive pressure from other Asian hubs and the weight of China’s economic slowdown.
Yet this storyline misses the bigger shift underway. Hong Kong is not fading — it is being repurposed. And in that repurposing, it is arguably becoming more strategically important to China than at any point in the past two decades.
The city is emerging as the offshore command center of China’s global financial ambition. The transformation is structural, deliberate and far more consequential than the stale conversations around “recovery” or “resilience.” Hong Kong is being woven into the architecture of China’s ascent as a financial power — not as a nostalgic relic, but as a forward-facing platform.
Start with the renminbi (RMB). If Beijing wants a more global currency, it needs a global marketplace that investors actually trust. That marketplace is not Shanghai or Shenzhen. It is Hong Kong. The city’s dominance in offshore RMB liquidity — by far the world’s largest pool — gives China something it cannot replicate onshore: a controlled environment that nonetheless operates under global norms.
RMB bond issuance, swap programs and cross-border settlement mechanisms now run through Hong Kong with increasing speed. The RMB’s international future depends not on political declarations, but on market functionality. On that measure, Hong Kong is indispensable.
Foreign critics often ask whether the RMB can truly internationalize under China’s capital controls. Hong Kong provides the answer: yes, if there is an offshore valve sophisticated enough to bridge the two systems. Beijing understands this. It is why the city continues to be the testing ground for every major RMB liberalization step.
Capital markets make the point even more sharply. While some observers fixate on declining IPO volumes, they overlook the structural reforms quietly transforming how international capital interacts with China.
Listing reforms, cross-border fund distribution and improved market infrastructure are positioning Hong Kong as the most effective — and arguably the only credible — offshore venue for raising Chinese capital globally.
China is not simply defending Hong Kong’s status as a global market; it is reengineering it. The city offers something no other financial center can: the ability to channel global capital into China without exposing the onshore system to destabilizing flows.
This dual-track structure — onshore for scale, offshore Hong Kong for global reach — is the backbone of China’s financial strategy. To dismiss Hong Kong because its IPOs no longer mirror the exuberance of the 2010s is to misunderstand its new purpose. Its value lies not in speculative cycles, but in strategic function.
The wealth-management shift is even more revealing. As China’s affluent class expands, Hong Kong is becoming the only offshore hub capable of handling Chinese wealth at global standards.
Family-office incentives, tax clarity and a regulatory environment aligned with international compliance norms make the city uniquely suited to manage China’s growing private capital — capital that Beijing increasingly wants deployed in global markets rather than parked domestically.
This is not capital flight; it is capital strategy. Hong Kong is becoming the offshore balance sheet of China’s globalising wealth.
But it is in innovation where Hong Kong’s new identity becomes unmistakable. While other financial centers debate whether digital assets and fintech belong within their regulatory remit, Hong Kong is building frameworks to actively integrate them.
These are not cosmetic signals. They represent an attempt to anchor the city at the frontier of financial experimentation, from virtual-asset licensing to green-finance taxonomy to cross-border fintech pilots.
Critics once argued Hong Kong lacked a defining role in China’s tech-driven economic future. That view is now obsolete. In financial innovation, the city is becoming the bridgehead where China tests what it cannot yet fully implement onshore, and where global investors engage with new Chinese financial technologies under familiar regulatory oversight.
The implications extend far beyond the city. A more internationally connected Hong Kong strengthens China’s ability to shape the rules of global finance — not by demanding them, but by participating in them.
Through Hong Kong, China can influence capital standards, payment systems, green-finance frameworks and digital-finance architecture. No other platform affords this leverage.
The real risk for Hong Kong is not irrelevance; it is complacency. The city must continue to move faster than its rivals — and faster than the geopolitical narratives that seek to diminish it. Its comparative advantage lies in being both deeply Chinese and institutionally global. That duality is not a vulnerability; it is the source of its power.
The world’s fixation on Hong Kong’s past distracts from the far more important story of its future. The city is becoming the operational center of China’s financial modernization and the offshore engine of its global financial projection.
If China does emerge as a financial powerhouse in the coming decades, Hong Kong will not merely have played a role — it will have been the pivotal platform that made it possible. Hong Kong is not a fading star in Asia’s financial constellation. It is the quietly rising one, and China’s global financial strategy depends on it.
The writer is a senior finance professional and an AsiaGlobal Fellow at the University of Hong Kong, specializing in China’s financial globalisation.
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本文於 修改第 7 次
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美元急速失勢 -- Sahil Nair
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The Dollar in Freefall: Why America’s Currency Crisis Is Worse Than You Think
Sahil Nair, 08/22/25
Inside the hidden forces driving the dollar’s decline and what it really means for America’s future power.
I have covered financial news for years, and nothing prepared me for what I am seeing right now. The U.S. dollar is falling at its fastest pace in more than half a century — yes, you read that right. While we haven’t seen anything like this since 1973. And as someone who’s watched markets for a few decades, I can tell you that this is not just another minor hiccup. This is historic.
Within the last six months, I’ve seen the dollar lose more than 10% against a basket of currencies of America’s biggest trading partners. When I first began noting this trend, I actually believed that it could be of a temporary nature. But as weeks stretched into months, it has gradually become clear that this is a larger thing we’re dealing with.
Understanding What “The Dollar is Falling” Actually Means
This is easy to misunderstand because I have noticed that lots of people are led astray by currency talk. Let me explain it in English. When we say the dollar is falling, we mean you’re getting less foreign money when you trade your dollars.
Here’s an actual example that really struck a chord with me: Last year, as I was contemplating a trip to Paris, a single U.S. dollar netted me one euro. Pretty straightforward, right? But when I looked at exchange rates a week ago for a different European vacation, that dollar would have translated into just 86 cents in euros. That’s pretty major and would definitely impact my travel budget.
And this is not just an issue for the euro. It has been all currencies that I’ve been watching, and the dollar is losing out everywhere against the Canadian dollar, Mexican peso, Australian dollar, British pound, Swiss franc, Chinese yuan and even the Russian ruble. The ruble scare was something I especially took note of after seeing how the dollar has fallen 30% against it in the last six months. That’s massive.
The Four Pillars That Control Currency Strength
What I’ve learned from my own research and conversations with financial experts is that currency strength ultimately comes down to supply and demand. But what drives that demand? And there are four constructs that are key in my view:
1. Inflation: The Silent Currency Killer
Inflation is essentially how quickly prices increase for things people use every day. I certainly experience this in my own wallet when I go grocery shopping now versus two years ago. Here’s why it matters for the dollar: Inflation erodes the purchasing power of a currency, which means that each unit of it buys less stuff when inflation is high.
They see this happening, say foreign investors, and then think “Why’d I want to hold a currency that is losing buying power?” So they turned elsewhere, diminishing demand for dollar and causing its value to fall even further. It’s a vicious spiral I’ve witnessed in other countries in the past.
2. Interest Rates: The Double-Edged Sword
Interest rates are fascinating because they are essentially a seesaw that moves up and down with inflation. So when about four years ago I bought some government bonds paying 2% a year in interest, I was earning a whopping $20 a year in interest for every $1,000 I invested. Today at 4.5%, that $100 would be earning me $4.50 a year.
Foreign investors often are lured by higher rates, which allow them to earn more from their U.S. investments. But there’s a catch it does so only if other countries have lower rates. If the UK offers 5% and the U.S. offers 4.5%, where do you think smart money goes?
This has been the balancing act the Federal Reserve has been trying to do and to be honest, I do have them between a rock and a hard place.” That’s down from three rate cuts previously, which is good for economic expansion but makes our currency less appealing to foreign investors.
3. Stability: The Foundation Everything Sits On
This gets really exciting for me. Investors want predictability. They want to know that if they park their money in a country, the rules are not going to suddenly change overnight, there won’t be a political meltdown and the government won’t make irrational decisions.
I have been following U.S. politics with increasing worry. When trade policies are constantly in flux, the independence of the Federal Reserve under attack and management of the economy in question, foreign investors get skittish. And investors with nerves don’t hang around.
4. Imports and Exports: The Trade Balance Game
The U.S. has a special edge here that not everybody appreciates. Yes, we import more than we export — and I see this every time I go shopping and observe how many products are from other countries. This typically weakens a currency.
But the dollar has a secret weapon: It is the world’s reserve currency. An awful lot of oil changes hands internationally in dollars, meaning a country has to have some dollars on hand simply to buy oil. There is thus a permanent demand for our currency, even if our trade balance is less than rosy.
Why the Dollar is Crashing Right Now
So just what is driving this historic decline? It’s mainly the third pillar — stability that is reflected in my calculations, based on my interpretation. In particular, financial stability that has investors really concerned.
The Debt Crisis That Keeps Me Up at Night
To be sure, the numbers are eye-popping, and also a bit terrifying. Now the United States national debt has exploded to $37 trillion. Let me put that in context — when I began to follow finance, this number was a fraction of where it is now.
Here’s what really concerns me: when this debt rolls over (gets refinanced), it’s getting done at rates that are dramatically higher. The interest cost by itself is now above $1 trillion a year. That’s money that might be used on infrastructure, on education, on health care, but instead goes to paying interest on the old debt.
I have seen this movie in other countries, and there are never good outcomes. When debt service costs balloon, governments have two bad options: they must either choose to spend less elsewhere or take on new debt to pay the interest. Both roads can result in a crushing spiral of debt.
The credit rating agencies are watching as well. Fitch cut U.S. government debt from AAA to AA+ in 2023, citing “deterioration in standards of governance over the last 20 years.” Moody’s now joined with their downgrade. These are not political opinions — they are mathematical estimates of risk.
Policy Uncertainty is Scaring Investors Away
“I am particularly worried about the instability of recent economic policies. The piecemeal, start-and-stop style of tariffs, coupled with attacks on Fed independence, has set the stage for an environment in which investors can’t get their arms around what’s next.
It isn’t helping that both are supporting an estimated $3.3 trillion spending bill, which would hit the $3.3 trillion barrier in new deficits by 2034. As I see it as an investor, it’s not hard to figure out why foreign money is going elsewhere.
Historically the biggest foreign holders of U.S. debt — China and Japan — are trimming their holdings of U.S. treasuries. It’s a problem when the customers that matter most to you go shopping elsewhere.
The Inflation and Interest Rate Dilemma
Here’s where things get complicated. That is far less than the 9.1% peak of a while back, I remember that because everything from gas to groceries was agonizingly expensive. On the plus side, inflation has cooled a lot.
But that causes a new issue. The Federal Reserve, with inflation in check, is seeking to cut interest rates to spur economic growth. Lower rates are tantamount to lower returns on U.S. government bonds, which in turn makes them less appealing to foreign investors.
At the same time, there is mounting fear that inflation could roar back to life, particularly if new tariffs are imposed. Tariffs effectively raise the cost of imported goods, which can lead prices to rise throughout the economy. So we have the potential for both lower investment returns and higher prices — a recipe for currency weakness.
What This Means for Regular Americans Like Us
Let me get practical about how this affects real people, because that’s what matters most.
Your Shopping Bill is About to Get More Expensive
If you purchase anything that has its origins outside the United States and let’s face it, that’s just about everything these days you’re going to feel this in your pocketbook. When the dollar is weak, foreign companies have to charge more dollars to receive the same value they received before.
I was speaking with a friend who imports electronics, and he summed it up like this: “If I buy products from South Korea and the dollar drops, Korean suppliers need more dollars to get the same amount of Korean won than before. So they hike their dollar price.”
This isn’t only about the obvious imports, like cars or electronics. We are going to be talking about what goes into the products made in America, the raw materials and even some food products. Those price increases could be felt in just about everything.
Travel Abroad Just Got Way More Expensive
As a fan of travel, that hits close to home. That European holiday I told you about earlier? It’s going to be a lot more expensive, now. Hotel and restaurant bills, travel, shopping — it all costs more when your currency is weak.
I computed that a $3,000 European holiday from last year would now run me about $3,500 simply on account of the currency. That’s an additional $500 for precisely the same trip, without an accompanying upgrade in service or experience.
But There’s a Silver Lining for Some
It’s not all bad news. American exporters are loving this, in fact. A weaker dollar makes American products more competitive around the world.
I have a friend who owns a small manufacturing company that ships products to Canada. His sales are up because Canadian companies can buy more American products with their stronger currency. This could lead to more jobs in export industries such as manufacturing, technology and agriculture.
Tourism to the U.S. would also rise. Foreigners will receive more for their dollar to visit America so this will bode well for our hospitality and service economy.
Is This Really the End of the Dollar?
I’ve watched many headlines that scream end of dollar domination. I understand the alarm but I think that is a bit too dramatic.
Yes, the dollar has serious problems — debt on the rise, policy uncertainty, global shifts afoot. But it still has one stupendous advantage: it’s the world’s reserve currency. This status doesn’t disappear overnight.
Just think about it oil transactions, global trade, central bank reserves so much of the global economy still relies on dollars. And said change would need a global effort and an alternative that works. China and other nations are making strides toward alternatives, but we’re years off from any viable replacement.
My Personal Take on What’s Coming
Having watched markets for long enough, I think we’re due for a period of sustained dollar weakness, not collapse. The things that made the dollar strong like America’s large economy, deep financial markets, and political stability are still there, they’re just under a cloud right now, one of policy uncertainty and fears about debt.
I believe we should be keying on the following:
1. Debt management: How will the US get its fiscal house in order?
2. Policy predictability: Will there be additional stability in economic policy?
3. Global alternatives: How fast could other currencies, or systems, dislodge the dollar from its pedestal?
4. Economic performance: Will the U.S. economy keep growing through these headwinds?
What I’m Doing to Protect Myself
[Image suggestion: A person at a desk with financial planning documents, calculator, and investment portfolios spread out]
Personally, I’m taking several steps to protect against continued dollar weakness:
1. Diversifying investments: I’m putting some money in foreign stocks and bonds
2. Considering commodities: Things like gold often do well when currencies weaken
3. Travel planning: If I’m planning trips abroad, I just book sooner rather than later
4. Shopping strategy: For large purchases of imported goods I plan to consider, if possible, purchasing sooner
The Bottom Line
This dollar downshift is real, it’s big and it seems poised to continue at least in the near term. But I am reluctant to declare the end of American economic dominance, though it is a wake-up call.
Regular Americans are likely to feel the effects mostly in the form of higher prices for imported goods and more expensive international travel. But there might be benefits in job creation in export industries and more tourism to the U.S.
The trick is to stay informed and to make smart financial decisions in light of this new reality. Currency swings are all just a routine part of the global economy, but the speed and magnitude of this one makes it an event worth watching.
What do you think? Are you feeling the impact of the weaker dollar in everyday life? Your thoughts in the comments please. And if you found this analysis useful, please pass it on to anyone else who might want to gain a clearer idea of what’s really happening with our currency.
References
This article was researched and compiled using information from the following sources:
1. ABC News — “US dollar off to worst start in 50 years: Here’s what that means for you”
2. YouTube Educational Content — “The Dollar’s Fastest Decline in 50 Years”
More Context: My personal opinions, analysis, investment strategies are formulated based on my interpretation of the information contained in the above sources along with my general financial knowledge. The nuts and bolts and stories provide working examples of topics covered in the references.
Disclaimer: The information provided in this article is for informational purposes only and should not be considered as financial advice. Currency markets are intricate and volatile. Be sure to consult with your financial advisors before taking action on fluctuations on exchange rates or other economic factors.
Written by Sahil Nair
Student of Psychology and Philosophy. Opinionated writer practicing in a wandering mind...
Published in The Geopolitical Economist
In The Global geopolitics, truth is one, but the wise interpret it differently.— Here, we interpret these diversions
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美元垮台將導致全球經濟、金融、和政治多重危機 -- Dennis J. Snower
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我雖然不是財經專家，但下文的分析應該可稱深入細緻；針對川瘋政策危及美國及全球經濟部份，尤其值得仔細一讀。是否危言聳聽，則請看官們自行判斷。
本文主旨雖然不在美元和人民幣間的「爭霸」，但內容和本欄談及美元地位及「全球流通貨幣」各文相關並相互呼應；故置於此處。
When the Dollar Falls
Dennis J. Snower, 08/22/25
By driving up the federal debt, undermining central-bank independence, and imposing sweeping tariffs on key allies, US President Donald Trump is striking at the heart of America’s financial power. If the dollar were to lose its reserve-currency status, the resulting realignment would be neither gradual nor orderly.
LONDON – For decades, the dollar’s position as the world’s leading reserve currency has provided the United States with extraordinary advantages: the ability to borrow at low interest rates, run large current-account deficits, and finance budget shortfalls by printing money without necessarily triggering inflation. But since the start of President Donald Trump’s second term, warnings about the “end of America’s exorbitant privilege” have grown into a steady drumbeat.
Timothy Snyder views the summit with Russian President Vladimir Putin as the moment a foreign-policy fantasy died.
The concerns are well-founded. Trump’s policies – from his attacks on the US Federal Reserve to his hands-off regulatory stance toward cryptocurrencies – are systematically undermining the dollar’s reserve-currency status. Losing the dollar’s primacy would invariably jeopardize the long-term health of the US economy.
But focusing solely on America’s fading privilege is like noticing a few trees ablaze while missing the wildfire igniting behind them. The loss of the dollar’s reserve-currency status would reverberate far beyond America’s borders, sending shockwaves throughout the global economy.
Financial markets, always on the lookout for potential risks, need only a critical mass of participants to believe that the threat is real for it to become so. Once enough investors begin selling a vulnerable asset, more follow.
Crucially, America’s “exorbitant privilege” is not a tribute owed to it for being the world’s leading superpower. It is simply a byproduct of how a reserve currency works. Like individuals, countries need a reliable store of value, medium of exchange, and unit of account. As foreign economies grow, so does their appetite for dollar-denominated assets such as US Treasuries and corporate bonds. This demand enables the US to run persistent current-account and trade deficits.
表單的底部
Moreover, US government deficits are largely financed through the sale of Treasuries, prized worldwide as a safe-haven asset. Because much of that liquidity is absorbed by foreign holders, the Fed can purchase these Treasuries with newly created dollars without boosting inflation. Strong international demand for US debt also holds down domestic interest rates, as investors are willing to accept low yields in exchange for the safety of dollar-denominated securities.
The Coming Reserve-Currency Realignment
To serve as a global reserve asset, a currency must be safe, liquid, stable, and widely accepted. This depends on seven key conditions.
First, the issuing country must maintain macroeconomic stability: low inflation, sustainable public debt, and sound fiscal and monetary policies that assure investors and central banks that the currency will retain its value over time.
Second, the issuing country must have deep and liquid financial markets, offering safe, highly tradable assets – particularly sovereign bonds – capable of absorbing large cross-border flows. Government debt can be an asset only when investors believe the debt will be managed responsibly and repaid.
Third, a politically independent central bank committed to price stability is essential to a currency’s credibility, particularly when monetary policies are transparent and anchored in rules.
Fourth, reserve currencies must be freely tradable and exchangeable across borders with minimal restrictions.
Fifth, the judicial system must uphold the rule of law. In particular, it must protect property rights, ensure that foreign investors can enforce contracts, and provide avenues for recourse to resolve disputes.
Sixth, a reserve currency must be seen as a global public good rather than a tool for promoting national self-interest – a perception that hinges on constructive global leadership and active multilateral engagement.
And lastly, the currency’s issuer must be a trade and finance powerhouse, because established network effects are necessary to encourage widespread use.
Trump’s policies have weakened each of these pillars of American economic dominance. The massive tax cuts at the heart of his grossly mislabeled “One Big Beautiful Bill Act,” unaccompanied by any real spending restraint, are projected to add trillions of dollars to the national debt, jeopardizing macroeconomic stability. Although demand for US Treasuries remains strong, mounting debt and the risk of default – exacerbated by Trump’s use of the debt ceiling as political leverage – have eroded investor confidence.
At the same time, the Fed’s independence has come under strain as Trump publicly pressured policymakers to slash interest rates and suggested replacing Chair Jerome Powell and other officials with political loyalists. Although capital controls were not imposed, the administration’s threats to block Chinese stock listings and exclude adversaries from SWIFT have fueled uncertainty over future access.
Trump’s use of executive authority to sanction foreign firms, freeze the central-bank assets of countries like Venezuela, demand a 15% cut of the revenues from sales of advanced microchips to China, and impose high import tariffs on longstanding allies has cast further doubt on US policy credibility. As a result, allies are exploring euro- or renminbi-based alternatives, and some central banks have begun diversifying away from dollar holdings toward gold and other assets, accelerating the dollar’s decline.
If doubts about the dollar’s long-term reliability are allowed to take hold, the reserve-currency realignment will be neither gradual nor orderly. The more probable outcome is financial panic, since expectations of currency shifts tend to be self-fulfilling. If investors expect the dollar to fall, they will sell dollar assets to avoid losses. This, in turn, will drive the dollar down, validating the initial fear.
The faster the dollar falls, the more urgently others will seek to exit their positions. Major central banks and pension funds could rapidly shift reserves into gold, euros, or renminbi, pushing up Treasury yields as buyers demand higher returns to offset increased risk. A falling greenback could also trigger margin calls on leveraged dollar trades, forcing funds and banks with significant exposure to liquidate other assets, spreading instability across global markets.
There Is No Alternative
If Trump continues to impose aggressive tariffs and seize foreign-held assets, rivals like the ten-member BRICS+ group of major emerging economies may openly abandon the dollar. This could set off massive foreign-exchange-reserve shifts and a global scramble for non-dollar safe havens.
Yet the alternative safe-haven bond markets – primarily Germany, Switzerland, and Japan – are far too small to absorb the enormous capital currently concentrated in dollar assets, particularly US Treasuries, which total $28 trillion, with about $8.5 trillion held by foreigners. The UK gilt market is similarly undersized.
In Europe, the absence of a fiscal union and a safe-asset equivalent to US Treasuries not only constrains the supply of Eurobonds but also undercuts eurozone cohesion. Meanwhile, China’s sovereign-bond market remains limited as a reserve haven because of capital controls, lack of full currency convertibility, political opacity, and weak legal protections.
To be sure, sovereign and quasi-sovereign bonds – issued by institutions like the European Investment Bank, World Bank, Asian Development Bank, and Germany’s KfW – could gain some reserve status thanks to their reliability and multilateral backing. But that is more a long-term prospect than an immediate solution.
Large corporations with strong balance sheets, such as Apple or Microsoft, may serve as quasi-sovereign alternatives. But private credit carries substantial risk – especially in times of global financial stress – and cannot be a substitute for sovereign liquidity. Bitcoin and “digital gold” are viewed by some as hedges against fiat-currency risk, but their high volatility, along with regulatory uncertainty and scalability issues, prevent them from absorbing significant reserve flows.
Other options are equally limited. Central banks – particularly those of China, Russia, and Turkey – have been accumulating gold reserves, but the global supply of gold is finite. While special drawing rights (the International Monetary Fund’s reserve asset) could become more prominent if the dollar’s credibility collapses, SDRs are not market-traded assets, as their liquidity is centrally managed and politically contested. Central bank digital currencies (CBDCs), such as China’s e-CNY and the proposed digital euro, could eventually serve as channels for cross-border liquidity once they are interoperable and widely adopted. But that is unlikely in the short term.
In short, if confidence in the dollar as the world’s reserve currency begins to falter, the resulting realignment will likely resemble a frantic scramble for safety, with no true alternative readily available. Such a panic could fracture today’s integrated global financial system into regional or bloc-based networks.
This instability could be exacerbated by cryptocurrency markets, which operate with far less oversight than traditional financial markets and are set to be even less regulated under the current US administration. Most cryptocurrencies are far more volatile than fiat currencies or traditional safe assets, making them unsuitable as a stable store of value.
Deregulated cryptocurrency markets, particularly those built around stablecoins, pose growing systemic risks to US Treasury markets. Because stablecoins are typically pegged to the dollar, their issuers hold large reserves in short-term, highly liquid assets, primarily Treasuries and cash or cash equivalents. A sharp break from the dollar peg or a sudden loss of confidence in a major stablecoin could lead to a large-scale liquidation of Treasuries to meet redemption demands – a crypto version of a bank run. Such a sell-off could drain liquidity from Treasury markets, distort short-term yields, and cause spillovers into other asset classes, including mortgages and corporate bonds.
Moreover, cryptocurrencies – especially stablecoins and CBDCs – could challenge the US dollar’s dominance in global payment flows. If widely adopted, they would divert transaction volumes away from dollar-based systems such as correspondent banking and SWIFT. But without coordinated international regulation, crypto-based payment systems risk fragmenting financial oversight, obscuring capital flows, facilitating money laundering and terrorism financing, and restricting smaller economies’ ability to manage their monetary policies.
The growing use of cryptocurrencies in cross-border settlements could also increase exposure to cyberattacks and network disruptions. Their use for sanctions evasion, illicit transactions, and tax avoidance is already chipping away at the dollar’s role in the shadow-banking system, with profound implications for sanctions enforcement and economic stability.
The Costs of Fragmentation
As trade barriers rise and foreign-exchange volatility intensifies, financial flows, reserve holdings, payment systems, and capital markets are becoming increasingly confined to competing regional blocs. Financial fragmentation also impedes currency convertibility, disrupts SWIFT-style messaging systems, and complicates regulatory coordination. These frictions create exchange-rate mismatches, legal uncertainty, and delays in cross-border payments.
When commerce and finance are divided between spheres of interest, capital is allocated according to geopolitical loyalties rather than market fundamentals. The result is a disjointed global economy characterized by slower growth, reduced productivity, and higher capital costs – especially for non-aligned developing economies.
Meanwhile, fragmentation curtails the ability of global institutions such as the IMF, the World Bank, the World Trade Organization, and the Bank for International Settlements to maintain stability, coordinate crisis responses, and establish universal standards. As a result, more responsibility is being shifted to regional bodies like the Asian Infrastructure Investment Bank.
As countries redirect reserves toward regional alternatives, global liquidity could shrink while risk premiums surge. In this environment, competing blocs are more likely to adopt beggar-thy-neighbor policies, including competitive devaluations and export controls. Escalating rivalries over currency dominance, reserve status, and payment systems will increase the weaponization of financial tools like sanctions, capital controls, and reserve seizures, heightening the risk of instability and prolonged economic downturns.
It gets worse. As economic interdependence unravels, with deepening geopolitical divisions inevitably accelerating the creation of separate clearing systems, digital currencies, and regional trade systems, the loss of key restraints on armed conflict will increase the likelihood of military confrontation.
Given the stakes, framing the dollar’s decline merely as the end of America’s “exorbitant privilege” misses the larger story. The fate of the greenback is not a parochial American concern but a global problem. If a fragile yet manageable equilibrium underpinned by multilateral cooperation gives way to financial balkanization, the coming decades will be defined by economic conflict and the constant threat of all-out war.
Dennis J. Snower has been writing for PS since 2014. He is the Founding President of the Global Solutions Initiative and President Emeritus of the Kiel Institute for the World Economy, is a visiting professor at University College London and a professorial research fellow at INET Oxford. He is a non-resident senior fellow at the Brookings Institution, an international research fellow at Oxford University’s Said Business School, and a research associate at the Harvard Human Flourishing Program.
相關閱讀：
Politics2
Trump’s Alaska Folly
本文於 修改第 3 次
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「穩定幣法案」試圖鞏固美元地位 -- Anand Sinha
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GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act)：「穩定幣法案」
相關閱讀：
* 《人民幣無法取代美元原因》讀後(該欄2025/05/24)
* 人民幣無法取代美元原因(該欄2025/05/24)
U.S. makes shocking move to counter China’s de-dollarization push
The GENIUS Act could be the Trump administration's attempt at countering China's de-dollarization push.
Anand Sinha, 07/23/25
President Donald Trump makes no secret of the fact that the U.S. is engaged in a geopolitical competition with China. While the U.S. is still the largest economy in the world, it is closely followed by the Asian superpower.
When Trump initiated the global tariff war in April, it was clear the main target was China. However, the previous Joe Biden administration also engaged in a trade war with the country.
Among the many concerns of the Trump administration is China's aggressive attempts to de-dollarize global trade in emerging markets where it holds sway.
It is most manifest in China's Belt and Road Initiative (BRI) — also referred to as the New Silk Road — the ambitious infrastructure development project that aims to connect the country to the rest of the world. The Asian giant is increasingly encouraging trade settlements in digital renminbi or e-RMB, its central bank digital currency (CBDC).
In fact, USD payments have declined from around 80% in 2010 to 40% in 2024, and RMB payments have risen from negligible in 2010 to around 55% in 2024, the Financial Times reported in August 2024 as it cited the State Administration of Foreign Exchange.
Source: FT, State Administration of Foreign Exchange 請至原網頁查看統計圖
To dethrone the U.S. dollar's dominance in global trade settlements, China is relying on RMB-based payments and bypassing USD-based SWIFT payment networks.
Trump's 'genius' to challenge China's de-dollarization strategy
On July 18, Trump signed the GENIUS Act into law to regulate stablecoins pegged to the USD.
A stablecoin is a type of cryptocurrency that attempts to stabilize its value, unlike traditionally volatile cryptocurrencies such as Bitcoin, by being pegged to a traditional currency like the USD or a commodity like gold. The GENIUS Act only concerns itself with stablecoins pegged 1:1 to the USD.
The Trump administration is aggressively promoting a digital assets economy, and stablecoins are a dominant segment.
However, stablecoins could also be a possible "counter-balance" to de-dollarization trends in emerging markets, as per a recent stablecoin report by the on-chain data analytics platform Messari.
David Krause, Emeritus Professor, Finance Department, Marquette University, recently wrote in a paper that Messari cited:
"The Trump administration’s promotion of dollar-backed stablecoins represents a strategic effort to reinforce the dollar’s global role amid increasing discussions on dedollarization."
Trillions of dollars anticipated
As per DeFiLlama, the total stablecoin market cap is $263 billion at the time of writing. Tether's USDT and Circle's (NYSE: CRCL) USDC account for more than 86% of the market share.
Source: DeFiLlama 請至原網頁查看統計圖
Other coins like Trump-backed USD1, Ripple's RLUSD, and PayPal's PYUSD are also making inroads in the already growing market.
Ripple CEO Brad Garlinghouse recently said many people think the stablecoin market will reach $1 trillion-$2 trillion in "a handful of years." However, it is yet to be seen if it will grow enough to challenge China's attempts to de-dollarize the global economy.
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摩根大通分析師：人民幣終將取代美元 -- Jai Hamid
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請參見本欄上一篇(本文的《讀後》)。
JPMorgan predicts China’s yuan dethroning the US’s dollar
Jai Hamid, 01/16/24
The global financial landscape is on the brink of a monumental shift, with JPMorgan throwing a spotlight on the Chinese Yuan’s potential to unseat the US Dollar from its long-held throne. This prediction isn’t just a casual remark in the world of currencies; it’s akin to forecasting a tectonic shift in the very bedrock of international trade and economics.
BRICS Bloc’s Push for De-dollarization
At the heart of this potential upheaval is the BRICS bloc, a coalition of emerging economies, which has been steadily chipping away at the dollar’s dominance. Their strategy? A concerted push towards de-dollarization, favoring local currencies over the ubiquitous greenback. This isn’t a subtle nudge but a bold, calculated move to redefine the rules of global finance.
The Chinese Yuan, in this grand scheme, is emerging as the poster child of this movement. It’s not just about being an alternative; it’s about being a frontrunner in a race that many didn’t even realize was on. And the statistics speak louder than words – there’s an evident spike in the Yuan’s use within the BRICS transactions, painting a clear picture of a currency on the rise.
Strategic Shifts Paving the Way for the Yuan
Enter Alexander Wise of JPMorgan, a strategist whose insights have the weight to sway opinions in financial circles. He isn’t just talking about China’s growth; he’s linking it directly to the Renminbi’s (Yuan) future as a heavyweight in the global economic arena. His views aren’t just forecasts; they’re a roadmap for how the Yuan could climb to the top.
Wise talks about a slew of strategic moves – from relaxing capital controls to boosting market liquidity – that could bolster the Yuan’s position. It’s not just about playing the game; it’s about changing it. China’s maneuvers to position its government bonds as a secure asset are also part of this master plan. It’s like watching a chess game where China is thinking several moves ahead.
The Dollar’s Uncertain Horizon
The US Dollar’s fate, in this narrative, is like a star whose light is dimming. As the Yuan’s luminescence grows, the Dollar’s glow wanes. It’s not an overnight change, but a gradual, inexorable shift. The dollar has been the bedrock of international trade for so long that imagining a world where it’s not the mainstay is both intriguing and unsettling.
And it’s not just about economics. This shift speaks volumes about geopolitical dynamics, signaling a change in how nations perceive and use currencies in the grand chessboard of global politics. The Yuan’s rise and the Dollar’s potential fall are not mere fluctuations in currency values; they are harbingers of a new era in international relations.
In essence, JPMorgan’s prediction is more than a financial forecast; it’s a narrative of change, a story of emerging powers and shifting balances. The Yuan’s ascent to potentially dethrone the Dollar is a saga that will be keenly watched and analyzed in the annals of economic history. As the world watches this unfold, one thing is clear: the currency wars are not just about money; they’re about influence, power, and the future shape of global order. The battle lines are drawn, and the world is poised to witness a financial revolution, with the Yuan leading the charge.
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《摩根大通分析師：人民幣終將取代美元》讀後
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哈密德女士這篇分析報導：摩根大通副總經理外斯先生對國際貨幣龍頭走向的展望(請見本欄下一篇)。以上她芳名的超連結引導至她在《秘密政經中心》網誌貼文的部落格；大家可以前往看看她對時下相關重大事件的評論/分析。
外斯先生認為「大金磚」國家有計畫的試圖打破美元獨領國際貨幣風騷的現況。他強調貨幣與地緣政治角力兩者間相互影響的動態關係。請參看本欄其它的評論/分析。並請對照《人民幣失去主要支柱》一文。
此外，哈密德女士多次此用「對比」、「形象化」、和「誇大其詞」等修辭技巧，在政、經評論中並不多見；值得偶一學學，增加一些可讀性和讓讀者印象深刻。
「對比」如：
It’s not just about playing the game; it’s about changing it.”
請注意 playing 和 changing 兩字在「意思」上的差別。
「形象化」如：
“It’s not just about being an alternative; it’s about being a frontrunner in a race that many didn’t even realize was on.”
這段話中的 ”frontrunner in a race” 以「賽跑中的領頭羊」來比擬人民幣在貨幣爭鋒中的角色。
「跨大其詞」如：
“This prediction isn’t just a casual remark in the world of currencies; it’s akin to forecasting a tectonic shift in the very bedrock of international trade and economics.”
這段話中的 ”casual remark” 和 “forecasting a tectonic shift”是「對比」。tectonic shift 在此指：地球板塊移動；它是典型的「誇大其詞」。
不過，在短短500多字的文章中，她用了兩次半 ”it’s not just about … it’s about … ”的句型；略嫌火候不足。。
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美國財長葉倫評論美元地位 -- Bethan Moorcraft
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和本欄第二篇文章《美元失勢因素分析》相比較，以下這篇報導並沒有新的訊息或更深入分析。只是葉倫財長的身份具有權威性；因此值得存檔備查。
‘A natural way to diversify': Janet Yellen now says Americans should expect a decline in the USD as the world's reserve currency — what’s really going on and how can you prepare?
Bethan Moorcraft, 06/15/23
‘A natural way to diversify': Janet Yellen now says Americans should expect a decline in the USD as the world's reserve currency — what’s really going on and how can you prepare?
The U.S. dollar saw an 8% decline in its share of global reserves in 2022 — causing some to question whether the dollar’s days of dominance are over.
Treasury Secretary Jannet Yellen gave her two cents on the matter of so-called “de-dollarization” during a congressional hearing on Tuesday — stating that no currency currently exists that could displace the greenback.
While U.S. sanctions and foreign policy plays have inspired a backlash from China, Russia and other prominent countries — who are keen to dethrone the dollar — Yellen remains adamant that “it will not be easy for any country to devise a way to get around the dollar.”
She did, however, warn that the dollar’s share of global reserves may continue to decline as countries look to “diversify.”
Here’s why the topic of de-dollarization is front and center today — and what you can do if you’re worried about the strength of the dollar.
Impact of U.S. sanctions
The dollar’s dominance in global trade and capital flows dates back at least 80 years — not just because the U.S. is the world’s largest economy, but also because oil and other essential commodities are priced in the greenback.
However, recent events — including the Fed’s aggressive rate hikes to stem domestic inflation, the trade war with China and the U.S. sanctions enforced after Russia’s invasion of Ukraine — have caused more countries to call for trade to be carried out in other currencies besides the U.S. dollar.
At the 14th BRICS Summit last year, Russian President Vladimir Putin announced measures to create a new “international currency standard.” Meanwhile, China has been urging oil producers and major exporters to accept yuan for payments, and major oil exporter Saudi Arabia has said it’s “open” to the idea of trading other currencies.
Even long-time allies, like France, have made non-dollar transactions since the U.S. ramped up its sanctions. In April, French President Emmanuel Macron said Europe must reduce its dependence on the U.S. dollar in order to keep its “strategic autonomy” and avoid becoming “vassals” (subordinate) to America.
When quizzed on the impact of these trends in front of the House Financial Services Committee, Yellen admitted that U.S. sanctions have motivated some countries to seek out currency alternatives — but she was adamant the greenback will remain dominant.
“The dollar plays the role it does in the world financial system for very good reasons that no other country is able to replicate, including China,” she said. “We have deep liquid open financial markets, strong rule of law and an absence of capital controls that no country is able to replicate.”
The dollar as a reserve currency
When asked if the dollar’s international status is declining, Yellen said she sees “virtually no meaningful workaround for most countries for using the dollar as a reserve currency.”
“We should expect over time a gradually increased share of other assets in reserve holdings of countries — a natural desire to diversify. But the dollar is far and away the dominant reserve asset.”
According to data from the IMF’s Currency Composition of Foreign Exchange Reserves (COFER), the U.S. dollar accounted for 58.36% of global foreign exchange reserves in the fourth quarter last year. In second place was the euro, accounting for about 20.5% of reserves.
Meanwhile, the Chinese yuan — which some think is the biggest threat to the dollar — accounted for just 2.7% of reserves in the same period and nearly a third of that is held by Russia, according to a 2022 IMF paper.
While de-dollarization efforts are clearly underway, most financial commentators share Yellen’s view that the dollar will retain its throne.
Eurizon SLJ Asset Management strategists published a note in April, where they acknowledged the “exceptional” decline in the dollar’s market share in 2022 due to the sanctions taken by the US and its allies against Moscow — but they added: “the dollar will likely continue to enjoy dominance as an international currency for a while longer.”
Likewise, Fitch Solutions said it doesn’t expect a “paradigm shift,” any time soon, given that there's no feasible alternative to the U.S. dollar for international trade.
(以下與主旨無關，略去。)
本文於 修改第 1 次
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美元失勢因素分析 – 路透社
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The end of King Dollar? The forces at play in de-dollarisation
Naomi Rovnick and Libby George, 05/25/23
LONDON (Reuters) - Rivalry with China, fallout from Russia's war in Ukraine and wrangling once again in Washington over the U.S. debt ceiling have put the dollar's status as the world's dominant currency under fresh scrutiny.
Russia's sanctions-imposed exile from global financial systems last year also fuelled speculation that non-U.S. allies would diversify away from dollars.
Below are some arguments why de-dollarisation will happen - or possibly why it won't.
SLIPPING RESERVE STATUS
The dollar share of official FX reserves (外匯存底) fell to a 20-year low of 58% in the fourth quarter of 2022, according to International Monetary Fund data.
Stephen Jen, CEO of Eurizon SLJ Capital Limited, said that shift was more pronounced when adjusted for exchange rate.
"What happened in 2022 was a very sharp plummeting in the dollar share in real-terms," Jen said, adding this was a reaction to the freezing of half of Russia's $640 billion in gold and FX reserves following its 2022 invasion of Ukraine. This had sparked a re-think in countries such as Saudi Arabia, China, India and Turkey about diversifying to other currencies.
TAKING THE LONGER VIEW
The dollar share of central banks' foreign reserves in the final quarter of 2022 did hit a two-decade low, but the move has been gradual and it is now at almost a similar level as 1995.
Central banks put rainy day funds in dollars in case they need to prop up exchange rates during economic crises. If a currency weakens too far against the dollar, oil and other commodities traded in the U.S. currency become expensive, raising living costs and fuelling inflation.
Many currencies, from the Hong Kong dollar to the Panama balboa, are pegged against the dollar for similar reasons.
WANING GRIP ON COMMODITIES
The almighty dollar has had a lock on commodity trading, allowing Washington to hinder market access for producer nations from Russia to Venezuela and Iran.
But trade is shifting. India is purchasing Russian oil in UAE dirham and roubles. China switched to the yuan to buy some $88 billion worth of Russian oil, coal and metals. Chinese national oil company CNOOC and France's TotalEnergies completed their first yuan-settled LNG trade in March.
After Russia, nations are questioning "what if you fall on the wrong side of sanctions?" said BNY Mellon strategist Geoffrey Yu.
The yuan's share of global over-the-counter forex transactions rose from almost nothing 15 years ago to 7%, according to the Bank for International Settlements (BIS).
BUT TOO COMPLEX A SYSTEM
De-dollarisation would require a vast and complex network of exporters, importers, currency traders, debt issuers and lenders to independently decide to use other currencies. Unlikely.
The dollar is on one side of almost 90% of global forex transactions, representing about $6.6 trillion in 2022, according to BIS data.
About half of all offshore debt is in dollars, the BIS said, and half of all global trade is invoiced in dollars.
The dollar's functions "all reinforce each other", said Berkeley economics and political science professor Barry Eichengreen.
"There just isn't a mechanism for getting banks and firms and governments all to change their behaviours at the same time."
A FRAGMENTED FUTURE
While there may not be a single dollar successor, mushrooming alternatives could create a multipolar world.
BNY Mellon's Yu said nations were realizing that one or two dominant reserve asset blocks was "just not diversified enough."
Global central banks are looking at a wider variety of assets, including corporate debt, tangible assets such as real estate, and other currencies.
"This is the process that is underway," said Mark Tinker, managing director of Toscafund Hong Kong. "The dollar is going to be used less in the global system."
AN UNSHAKEABLE BASIS
Because large bank deposits are not always insured, businesses use government bonds as a cash alternative. The dollar's status is therefore underpinned by the $23 trillion U.S. Treasury market - viewed as a safe haven for money.
"The depth, liquidity and safety of the Treasury market is a big reason why the dollar is a leading reserve currency," said Brad Setser, a Council on Foreign Relations fellow who tracks cross-border currency flows.
International holdings of Treasuries are vast and there's no credible alternative yet. Germany's bond market is relatively small, at just over $2 trillion.
Commodities producers may agree to trade with China in yuan, but recycling cash into Chinese government bonds remains tricky due to difficulties opening accounts and regulatory uncertainty.
"But you can hop on an app and trade Treasuries from anywhere," Natwest Markets emerging markets strategist Galvin Chia said.
($1 = 6.9121 Chinese yuan renminbi)
(Reporting by Naomi Rovnick and Libby George, editing by Karin Strohecker and Alex Richardson)
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