Recently the role of the dollar as a global reserve currency has been coming into question. To gain a better understanding of the dollar’s current status, let’s hear from one of the leading currency economists, Stephen Jen.
The main cause of the dollar’s rapid decline as a global reserve currency, according to Jen, are the exceptional sanctions the US government implemented. In particular, the freezing or confiscation of approximately half of Russia’s $620 billion of foreign reserves, as well as the outright seizure of assets belonging to Russian oligarchs, has contributed the most.
Although a decrease in the dollar’s dominance as the global reserve currency is expected to continue, Jen believes a new “non-dollar currency” will likely not take over the market share of the dollar. Instead, many more currencies will begin to be used in the global market.
The possibility of China’s yuan replacing the dollar was mentioned. In order for this to happen, Jen says that China’s financial sector must improve in quality. Foreign investors need to feel comfortable investing in Chinese assets, and the US is making sure this doesn’t happen easily. Therefore, China’s capital controls will need to remain in place for this transition to happen.
When it comes to a possible “tripolar” reserve currency setup, in which the dollar, euro and China Yuan all play major roles, Jen maintains that it is possible but would take years to become a reality.
Phil Rosen is an economist who pioneered the “dollar smile” theory. He has been speaking on the dollar’s current status as a global reserve currency and what the possible future holds. To stay competitive with other global currencies, he believes the US should focus on making sure its economic policies are rational and considerate of the global market.
The company mentioned in this article is Eurizon SLJ, a company founded and led by Stephen Jen. It specializes in providing high quality international financial services and solutions to a wide range of global customers. The company works to ensure that clients have access to the best investment opportunities and solutions available.
Stephen Jen is a leading financial economist and the CEO of Eurizon SLJ. He is the inventor of the ‘dollar smile’ theory and has been speaking on the logic and implications of global currency reserve dominance. He has also voiced his opinions on the potential of a tripolar reserve currency setup and what China’s yuan would need to do in order to rival the dollar.
