While new threats are rising, the story of the dollar's demise as the global
reserve is highly exaggerated.
As a global reserve currency, the dollar's share has been fairly stable at
around 60%. Despite the Chinese government's efforts to trade in its own
currency in recent years, Renminbi has barely cracked 2% of the global
reserve currency.
However, there are several new and emerging threats to dollar dominance:
1. The US Fed money printing during the pandemic could lead to inflation
and a decline in the dollar
2. Rise of Cryptocurrencies, particularly Bitcoin, as an alternative to Fiat
currencies
3. Moves by Central Banks to create their own digital currencies, such as
Digital Dollar, Digital Yuan, and Digital Rupee
4. Deglobalization trend
5. Use of the dollar as a political weapon by banning Russia from using its
own dollar reserves
We believe that the percentage of global trade conducted in dollars will
decline slowly in the coming decades. However, we do not expect a steep
decline as no clear alternative is on the horizon. As long as the US
economy stays dominant, so will the dollar. However, one real risk
emerges from cryptocurrencies for Fiat currencies.