Superpower America with its new President seems to be so unpredictable as never before. So for the rest of the world would be more important than ever to become more independent of the United States — both politically and economically. Now, however, the international monetary Fund (IMF) published data does not indicate the desire for independence.
IMF data show that there is no hope to repel the dominance of the US dollar. Reserve currency, which Europe or Asia could compete with the United States, does not exist and is not expected in the foreseeable future.
On the contrary: even the dollar once again strengthened our position as a leading world currency. Central banks around the world in the end of 2016, had an almost five trillion dollars, as much as ever. While 64% of all currency reserves are falling on the dollar. After three quarters of falling figures, the dollar again strengthened in the quarter, when Donald trump was elected President of the United States.
Shameful balance for China
The growth is notable because in October, the Chinese yuan became a currency basket of the IMF and thus officially became the fifth reserve currency and a new competitor to the dollar. However, the figures indicate almost shameful for China situation.
Issuing banks have invested in the conversion of almost 84,5 billion dollars in the Chinese people’s money. The yuan has thus just 1.1% of global foreign exchange reserves. Also, the competition for the dollar in Europe declined.The share of Euro in reserves slid from 19.74% again below 20%. This is the lowest rate after 2015. Even a little bit and figure would have fallen to the lowest level in 14 years.
“The debt crisis in Europe and negative interest of the European Central Bank undermined the attractiveness of the Euro as a global reserve currency,” said Lee Hardman (LeeHardman),currency strategist at the Bank of Tokyo-Mitsubishi UFJ. “The dollar in this situation remains uncontested. The European dream of a world leading currency seems unrealistic.
Assuming the efficiency of the economy, the dollar would have to be only 44% of global foreign exchange reserves and the Euro on the contrary — exactly one third. It is estimated by Deutsche Bank. However, none of the experts expects that this level will be reached so quickly. “This should be a challenge to win back the old higher rate of 28% in 2009,” says Hardman.
The debt crisis meant a turning point for the Euro
The Euro after its introduction still won portfolio of the banks. After years of dollar dominance portfolio managers faced a choice of alternatives. The turning point of the development of the Euro rival the dollar to second-class currency crisis coincided with the beginning of the debt crisis in the Eurozone.
In the autumn of 2009, Greece was forced to admit that its data on debt were embellished. Thus began the policy of issuing banks, which also harm the credibility of the Euro in the world.”The Euro will always play second fiddle while the EU probetsya to the United States of Europe with a total of debt,” says John hardy (John Hardy), a currency expert at Saxo Bank.
Beijing again in their efforts to develop the Renminbi a leading currency suffered a strong defeat. “China is the second largest economy in the world, but it is only one percent of reserves.” This obviously is not the path to a global currency first class,” says Eswar Prasad (Eswar Prasad), Professor at Cornell University, which before in the IMF led the China division.
According to estimates of Deutsche Bank, the yuan should have been — commensurate with the economic performance is to be exactly 18% of reserves. However, the managers of the contributions to the global Central banks don’t believe the politically popular currencies. Obviously,they fear that the Communist party of the yuan in August 2015, again, will devalue if the private economy will become unstable. “Nobody wants a reserve currency that is overvalued and may be further impaired,” says Sebastin Gali (Sebastien Galy Galyebastien), currency expert at Deutsche Bank.
It is noteworthy that the issuing banks have not followed the IMF and its reserves contain according to the special drawing rights. There the Chinese currency still accounts for eleven percent.
Trump is a real risk factor for the dollar
Thus, the dollar seems to have maintained its “exorbitant privilege” as it once called former Finance Minister and the French President valéry Giscard d’estaing (Valérie Giscard d’estaing). He was referring to America, which considerably popolzovavshis status of the world’s leading currency. It is the fact that the US, despite large debts, are site class AAA. Because the dominance of the dollar allows Americans it is easier to make debts on the international markets. Since they can print money, the risk of bankruptcy is small.
However, the unpredictable President trump could undermine confidence in the dollar, if it is to fulfil its primary objective — jobs — deliberately reducing the value of the US currency or will start a trade war. Then the leaders of the monetary institutions will be forced to look for alternatives to avoid the risk.
Also Galileos Gianakis (Valileios Gkionakis), expert at UniCredit, sees a second chance for the Euro. It is clear that the Central banks after the debt crisis has left the Euro. “However, the credibility of the Euro will be back,” says Gianakis. According to him, the economy in the Eurozone is growing again, and populism has already experienced its peak.”Pessimism is contained in the course. The development can only go up”.