Paul Gruenwald, Global Chief Economist of S&P Global, made comments on the future of the US Dollar at a conference in London. Stating that the dollar, which is accepted as the global reserve currency, ‘is no longer as attractive as it used to be’, Gruenwald stated that despite everything, the global reserve currency will not be put aside and will remain as the major currency.
The experienced economist, who mentioned that the sanctions imposed on Russia by the USA and Western countries, especially after the Russia-Ukraine war, damaged the power of the US dollar in the region and that other countries that trade with Russia are now more willing to do this trade using their own currencies, said the dollar is now ‘the world’s dominant one. He predicted that there would be no currency.
Stating that Russia’s sudden exclusion from the global financial system, however, which was quickly exposed to sanctions, was unsettling for other countries, Gruenwald stated that the USA’s exclusion from the system whenever it wants supports the need to seek other reserve currencies for other countries.
The biggest risk is Yuan!
Considering the global trade volume, China’s currency Yuan, which is known as the world’s factory, is expected to come to the fore in the coming periods. It is known that China, which has a current trade war with the USA, tries to use its own currency in some trades, using the sanctions arising from the Russia-Ukraine war as an excuse.
Expectations that the dollar will lose its throne in the future are not yet based on a strong foundation. The dollar’s influence on the world financial system is so strong that it accounts for almost 90 percent of global foreign exchange transactions, according to a 2022 survey by the Bank of International Settlements.
Krugman: Domination won’t last forever
Paul Gruenwald, S&P’s Chief Global Economist, is not the only economist who believes that the dollar’s dominance will not last forever.
The famous economist Paul Krugman, who won the Nobel Prize, is among those who believe that the dollar will lose its dominance. So much so that Krugman wrote in a column he wrote for the New York Times last Friday that “the dominance of the global reserve currency will not last forever”.
Still, Krugman states that it would be more accurate to adopt a realistic approach on this issue. Expressing that the global economic power of the dollar is very high, Krugman states that it is not possible for the dollar’s dominance to disappear immediately.
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