On the U.S. Dollar as the World’s Reserve Currency

Hi traders!

In recent times, there has been a flurry of conjecture on social media platforms, notably YouTube and Twitter, suggesting that the world may be moving away from the U.S. Dollar (USD) as the global reserve currency. However, these claims appear to be primarily based on rumours and speculation, rather than official statements from the G9 nations or credible economic analysis.

It’s important to understand that while the USD is not perfect, it has a long-established role in the world economy. A shift away from the USD as the global reserve currency would have profound implications and is not a decision that would be made lightly.

Firstly, the USD’s dominance is a reflection of the economic, political, and military strength of the U.S. It has provided a stable and reliable value store, which is critical in the world of international trade and finance. Changing the global reserve currency would require an alternative that can match or exceed the USD’s reliability and stability.

Secondly, the world’s financial markets are deeply intertwined with the USD. From settlement systems to contracts and financial instruments, the global financial infrastructure is built around the USD. Transitioning away would require an overhaul of this system, potentially causing significant disruption and uncertainty.

The recent Brexit process offers a cautionary tale about the complexity and potential repercussions of such significant changes. Even though Brexit involved a single nation exiting a regional bloc rather than a global shift in reserve currency, it still led to years of negotiations and uncertainty. A global shift away from the USD would be considerably more complex.

Moreover, any potential shift away from the USD would need to overcome political and language differences. The current status quo offers a common platform that all nations can agree upon. Any proposed alternative would have to navigate these differences and offer credible benefits over the USD to gain global acceptance.

So, while it can be interesting to speculate on potential changes in the global reserve currency, the practical, economic, and political realities strongly suggest that the USD will continue in its role for the foreseeable future. Changes of this magnitude are complex and fraught with potential repercussions. For now, the world continues to rely on the USD, and any contender would need to offer substantial and credible benefits over the current status quo.

Happy Trading!

Adam Harris

FXGlobe Ambassador Adam Harris is based in London, UK. He’s been trading professionally since 2013 and his specialties are technical and trend-based trading.

Trading Advice Disclaimer:
Our Ambassador’s Daily Picks are not trading advice. These are informational articles covering the events which happened in the market already & scheduled events which are scheduled to happen in the Economic & Earnings Calendar.

General Risk Warning:
Trading leveraged products such as Forex and CFDs carries a high level of risk thus may not be appropriate and/or suitable for all investors. The investment value can both increase and/or decrease and the investors may lose all their invested capital. The content of this website does not constitute financial or investment advice. Any information herein is of a general nature and does not take into consideration your personal circumstances, investment experience or current financial situation. Under no circumstances shall the Company or affiliated Companies have any liability to any person or entity for any loss or damage in whole or part caused by, resulting from, or relating to any transactions related to leveraged products.

APLFX (PTY) LTD acts solely as an intermediary in terms of the FAIS Act, rendering only an intermediary service (i.e., no market making is conducted by APLFX (PTY) LTD) in relation to derivative products offered by FS INTERNATIONAL LTD (i.e., the Product Supplier).

By proceeding with opening an account, this will be registered with FS INTERNATIONAL LTD, which is authorised and regulated by the Vanuatu Financial Services Commission (VFSC) with license number 700227. FS INTERNATIONAL LTD falls outside the South African regulatory framework and Vanuatu’s laws and regulations will apply in relation to your account.

APLFX (PTY) LTD is authorised by the Financial Sector Conduct Authority (FSCA) in South Africa as a Financial Service Provider (FSP) with authorisation number 52045.

APLFX (PTY) LTD acts solely as an intermediary in terms of the FAIS Act, rendering only intermediary service (i.e., no market making nor product producer is conducted by APLFX (PTY) LTD) in relation to derivative products through a licensed Product Supplier.

By proceeding with opening an account, I hereby acknowledge the Terms & Conditions of APLFX (PTY) LTD and that my account will be opened under a licensed Product Supplier with whom the intermediary arrangement exist with APLFX (PTY) LTD.