There are many reasons why the US dollar may be poised to lose its status as the world’s reserve currency. Not the least of these are efforts by the EU and China to make it happen. But, with apologies to Jean-Claude Juncker and Xi Jinping, Tina tells us it’s not going to happen anytime soon.
Tina is the old Margaret Thatcher dictum: “there is no alternative”. The phrase had been in vogue among equity traders (before October’s pullback) given weak returns in other asset classes, but it applies just as well to the dollar these days.
This has been a portentous year for the dollar. Its global share of central bank reserves fell to a five-year low of 62.3 per cent in the second quarter, even as the trade-weighted dollar index surged. Overall foreign holdings of US Treasury debt fell to 41 per cent, the lowest in 15 years. China began trading oil futures in renminbi, challenging the supremacy of the petrodollar. Germany, France, the UK and Russia suggested circumventing the dollar with a new payments mechanism to allow continued trade with Iran while avoiding US sanctions.