- From its use in foreign exchange (FX) transactions, trade invoicing, cross-border loans, international debt and more, the U.S. dollar has long reigned supreme as the world’s top reserve currency.
- The dollar’s position is supported by the significant size of the U.S. economy as well as its deep, liquid, integrated capital markets and well-established legal system.
- We believe the dollar’s position comes with a catch for the U.S. economy: structural budget and trade deficits that exert downward pressure on growth.
- While the euro and the yuan are the dollar’s stiffest competitors, we believe there are challenges that impede their progress in replacing the dollar.
- In our view, the complex financial infrastructure built around the U.S. dollar and the political influence the U.S. continues to wield globally, all support the dollar’s position for the foreseeable future.