The dollar still accounts for nearly 60% of all global reserves, while the Chinese yuan accounts for just 3%.
China and Russia’s recent moves to counter the dollar globally have attracted a lot of attention.
However, Allianz argues that the dollar’s supremacy does not face a serious threat, stating that "any significant change will take a long time to evolve". The unmatched liquidity of dollar-denominated assets and the private sector’s heavy reliance on the dollar will underpin its position over the long term, according to the German financial services giant.
The dollar’s status as a world reserve currency faces no real threat in the foreseeable future, according to Allianz.
The U.S. currency’s supremacy is due to its heavy dependence on the private sector and the unparalleled supply of safe dollar-denominated assets and liquids available for global central banks to invest their reserves, Allianz said in a recent note.
Much has been said about the possibility that a rival currency will one day usurp the "King Dollar" - with Beijing pushing for a trade based on the yuan, the BRICS countries planning a gold-backed currency and Argentina using Chinese currency for bank accounts and debt payments.
But any significant change to the dollar’s dominance will take "a long time," Allianz economists led by Ludovic Subran said.
“The dynamics affecting the US dollar’s role as a reserve currency are much more complex than official statistics suggest, and a significant decrease in the US dollar’s role in global finances will take much longer than current de-dollarization news suggests," they wrote in the note.
“Private sector use of the US dollar for trade and investment, rather than central bank portfolio allocation choice, will determine the currency’s status,” they added.
The role of the dollar in private sector transactions has remained virtually unchanged, with only slight adjustments based on foreign currency trading volume, bond issuance by non-financial corporations, and payments SWIFT, according to Allianz.
“Furthermore, reserves are mostly invested in safe and liquid assets, yet the non-dollar-denominated investment universe remains too small and fragmented to absorb demand for reserves, especially in emerging countries which have been the most critical of their reliance on the US dollar,” economists wrote.
The dollar still accounts for nearly 60% of all global reserves, while the Chinese yuan accounts for just 3%, according to the International Monetary Fund. It is also the currency in which crude oil, natural gas, and other important commodities are traded, facilitating contracts for countries around the world.
Original article published on Money.it Italy 2023-07-28 07:00:00. Original title: Dedollarizzazione, a che punto siamo?
