The dominance of the US dollar as the preferred reserve currency may be in jeopardy, as its share of global currency holdings in reserves continues to decline. According to data from the International Monetary Fund (IMF), the share of dollar reserves fell from 66% in the third quarter of 2014 to slightly more than 60% in the third quarter of 2020. This means that the share of the U.S. dollar is declining at a rate of approximately 1% per year.

As the share of the yen increased, the share of the dollar in the global reserve currency fell

A faltering reserve currency

At the same time, as a report suggests, this latest figure represents the lowest share of the dominant currency in the past eight years. In addition, the report explains: “(In fact) the decline in the share of the U.S. dollar began 20 years ago, when the euro replaced the previous dominant currency in the foreign exchange reserve basket.” According to data, the U.S. dollar performed the most in 1991. A bad year. In that year, the reported share of dollar reserves fell to 46%.

At the same time, as the first reserve currency, “this is the final effort of a single currency to overthrow the dollar”, the share of the euro has remained between 19.5% and 20.6% in the past six years. Similarly, the yuan, which became the official reserve currency in October 2016, does not seem to have made much progress. After the renminbi was included in the International Monetary Fund’s “Special Drawing Rights (SDR) Currency Basket”, Asian currencies only accounted for 2.13% of reserves. China is the second largest economy in the world.

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As the share of the yen increased, the share of the dollar in the global reserve currency fell

Yen advantage

On the other hand, after the share of Asian countries’ reserve currencies rose from 3.5% in 2015 to 6% at the end of the third quarter of 2020, only the yen seems to have risen. This feat made “the yen the third place.” -The largest reserve currency. “

At the same time, the same report explained that although the U.S. dollar’s ​​status as the world’s main reserve currency continues to deteriorate, “within ten years, the U.S. dollar’s ​​share will drop to 50%, and other currencies will make up for this defect.” In any case, this This deterioration will only begin to have an impact on the United States when the share of the dollar “drops (well below) 50%.”

Do you agree that the dominance of the dollar will continue to deteriorate? Tell us what you think in the comments section below.

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