An economist at the US Federal Reserve named Colin Weiss has identified three scenarios in which the US dollar’s function as a reserve currency will decline.
Weiss pointed out that the status of global currencies is affected by geopolitical factors, where countries maintain reserves in them, are especially based on guarantees of the security of the exported state or expressing support for their goals and political values.
The specialist in exploring probable scenarios predicted a half-percentage-point decrease in the amount of dollars in the official reserves of the United States in favour of the Chinese yuan and a one-percentage decrease in the usage of currency in export trade accounts.
The possibility of a decline in the dollar reserves in 43 countries in Africa, Central Asia, Latin America, and the Middle East, he continued, is high because these nations do not have formal military alliances with the United States; additionally, even if they do, Beijing and Moscow are cooperating with Washington in the same area concurrently.
As another scenario for the decline of the role of the dollar, Wais considers China’s potential to use the American currency as a reserve, a third option for such a development of events, which will contribute to strengthening China’s influence, and what may drive Hong Kong, which feels the danger of Western sanctions, to abandon its currency to the dollar and transfer part of Her exports to the yuan.
Source: Row, Linta.
Three scenarios are provided by an American expert to downplay the significance of the dollar’s status as a reserve currency.
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