Explain the various factors that are expected to dilute the global status of dollar. (200 Words)
Refer - Business Line
Enrich the answer from other sources, if the question demands.
IAS Parliament 3 years
KEY POINTS
· US Senate, in its “Defending Ukraine Sovereignty Act”, effectively threatened to cut Russia off from access to US dollars as a consequence of its aggression.
· Several Russian banks have been disconnected from the SWIFT system, seriously constraining their ability to communicate with other global banks.
· There are reports that China is attempting to buy oil from Saudi Arabia in yuan, and Russia is demanding to denominate its oil trade in rouble.
· To appreciate the role of the dollar as an international currency, we may note the following trends for the pre-Covid world. First, by the end of 2018, the US Fed revealed that more than 45 per cent of dollar bills are held outside the US.
· IMF data reported that as of end-2019, the dollar tended to play a significant role in exchange rate determination in 38 countries that do not have a freely floating exchange rate; the euro comes second with a list of 25 countries, many of whom belong to Francophone Africa.
· In terms of the IMF’s 2019 edition of Currency Composition of Official Foreign Exchange Reserves (COFER), since the beginning of the new millennium, nearly 60 per cent of the global forex reserves have been invested in US dollars.
