Why the Dollars Reign Is Near an End For decades the dollar has served as the worlds main reserve currency, but, argues Barry Eichengreen, it will soon have to share that role. Heres why—and what it will mean for international markets and companies. • Email By BARRY EICHENGREEN Updated March 2, 2011 12:01 a.m. ET The single most astonishing fact about foreign exchange is not the high volume of transactions, as incredible as that growth has been. Nor is it the volatility of currency rates, as wild as the markets are these days. Instead, its the extent to which the market remains dollar-centric. Journal Report Read the full Foreign Exchange report . WSJs David Wessel sits down with three senior experts in international finance - Edwin M. Truman, Joseph E. Gagnon and Eswar Prasad - for a discussion on the major issues facing currencies and the global economy. Journal Community Consider this: When a South Korean wine wholesaler wants to import Chilean cabernet, the Korean importer buys U.S. dollars, not pesos, with which to pay the Chilean exporter. Indeed, the dollar is virtually the exclusive vehicle for foreign-exchange transactions between Chile and Korea, despite the fact that less than 20% of the merchandise trade of both countries is with the U.S. Chile and Korea are hardly an anomaly: Fully 85% of foreign-exchange transactions world-wide are trades of other currencies for dollars. Whats more, what is true of foreign-exchange transactions is true of other international business. The Organization of Petroleum Exporting Countries sets the price of oil in dollars. The dollar is the currency of denomination of half of all international debt securities. More than 60% of the foreign reserves of central banks and governments are in dollars. The greenback, in other words, is not just Americas currency. Its the worlds. But as astonishing as that is, what may be even more astonishing is this: The dollars reign is coming to an end. I believe that over the next 10 years, were going to see a profound shift toward a world in which several currencies compete for dominance. online.wsj/news/articles/SB10001424052748703313304576132170181013248
Posted on: Mon, 02 Jun 2014 23:56:47 +0000
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