The US dollar is aptly referred to as the King Dollar. With the kingly status in line, the US dollar continues to attract a healthy balance of criticism and praise, only to emerge stronger than before.
Despite Yuan’s continuous efforts to derail the US dollar, the American currency has remained unbothered and continues to draw global momentum like never before. Here’s how.
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US Dollar: The King of Currencies
The Chinese Yuan, which is currently being dubbed a central currency challenging the US dollar’s prestige, is nowhere close to derailing the US dollar. Per a recent report by the Economist, the king dollar remains a leading currency player in the global finance domain. USD effortlessly prevents other currencies from taking away its global reserve currency status.
The report outlines how the “King Dollar” has remained steadfast in establishing global financial dominance despite facing headwinds worldwide. The US dollar is still the leading invoicing entity worldwide, dominating the sectors of cross-border transactions and foreign exchange transactions.
At the same time, the dollar has “indeed” noted a significant fall in its global reserve metrics, falling from 75% to 59% in 2023, per the latest IMF data. However, the decline above is not as hazardous to USD’s stature as it’s made out to be; the outlet is streamlined.
The report further shares how the greenback has fallen back to reflect and imitate the statistics of the year 1995, adding that the USD has indeed plummeted but is stable for now.
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The US Dollar Remains Strong: Here’s How
To quell the theory of the Yuan overtaking the US dollar, the outlet shared that all rich countries are American allies and that it would be difficult for them to adhere to any currency other than the US dollar. The change in currency flow may usher in an obvious trade disruption, causing a spree of losses.
“As for trade, flows involving at least one advanced economy but not China account for two-thirds of the global total. Calculate Gerard DiPippo, now of Bloomberg, and Andrea Palazzi of the Centre for Strategic & International Studies. It is hard to see why they would ever switch to yuan because rich countries are mostly America’s allies. Exclude them altogether, and only 25% of global trade would be left on the table. Three-quarters of which is between emerging markets other than China. Changing these flows to yuan is a tall order given the risks in holding the currency.” The publication shared.
Trump’s USD Protection Plan
The ongoing US elections are also promoting the status of the greenback. In a recent Bloomberg interview, former US president Donald Trump vowed to protect the US dollar. He shared how he will be levying a 100% tariff on countries moving away from the dollar to protect its integrity and curb the narrative of de-dollarization.
“If a country tells me, sir, we like you very much. But we are going to no longer adhere to being in the reserve currency. We are not going to salute the dollar anymore. I’ll say that’s okay, and you’re going to pay a 100% tariff on everything you sell into the United States.”
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Trump’s comments have added more strength to the greenback, which is showing signs of gradual ascent.
