WEF Panel: Dollar Dominance Not a Given
The value of the US dollar is near record-high levels with continued dominance in trade usage. However, it should not be assumed that its reserve currency status will always be guaranteed, according to a World Economic Forum panel.
Although the US dollar continues to be the world’s reserve currency, there are growing concerns about its sustainability. Headwinds include US borrowing trends, challenges from traditional and digital currencies as well as the burden of dollar debt.
«Both parties in the United States seem to think that debt is a free lunch,» according to a published article citing Harvard economist Kenneth Rogoff in a World Economic Forum panel, commenting on US federal debt.
«Anything that goes on without any constraint eventually has to stop,» added Raghuram Rajan, former governor of India's central bank.
Alternative Infrastructure
One potential scenario in the future is gradual diversification away from the dollar through a new financial infrastructure. Jin Keyu, a professor at the School of Business and Management at Hong Kong University of Science and Technology, noted that China has established around 40 bilateral currency swap lines with developing countries.
«China’s share of trade invoiced in renminbi has grown from 20 percent a decade ago to 56 percent today,» said Jin, highlighting that the US system often underserves developing nations.
