That’s according to Bank of America Securities, which has pushed back strongly against recent headlines claiming that the US dollar’s global role is about to end soon because emerging countries, and in particular BRICS (Brazil, Russia, India, China, and South Africa), are negotiating an alternative currency to replace the USD in trading with each other.
The “USD not about to lose its exorbitant privilege” as “no single alternative has appeared,” BofA said in the note authored by Athanasios Vamvakidis, a foreign exchange strategist, and other analysts.
The dollar remains by far the most important anchor currency for FX arrangements throughout the world, with the USD’s proportion in FX market turnover falling just somewhat from 90% in 1988 to 88% in 2022.Â
The shift away from the USD in global central bank reserves has been very slow over decades.
The share of USD reserve holdings by central banks around the world has gradually declined from 70% in 1999 to 58% today, but it has not been “a straight-line process”: the increase in USD reserve holdings from 2012 to 2016 reflects the scars of the EZ sovereign debt crisis, as well as the impact of negative rates, ECB QE, and Brexit.Â
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