The US is driving demand for alternatives to its dollar hegemony

SINGAPORE (July 15): The ongoing diplomatic crisis between the US and its longstanding “special” ally, the UK, is not doing the former’s global reputation any favours, especially with its commander-in-chief’s approach towards foreign policy and inveterate inability to refrain from Twitter gunslinging.

US President Donald Trump’s sanctions and protectionist pronouncements are made while secure in the influence of the US. That is in turn powered by the comparative strength of its economy and the “almighty” dollar, which lubricates much of the global financial system.

For decades, the greenback has dominated the bulk of global trade and transactions. According to the International Monetary Fund, about 62% of global currency reserves are held in US dollars, roughly another 20% in euros, 5% in yen and 4% in pound sterling. About 2% is held in renminbi. The US dollar is also still the most commonly used currency for international payments. As at May this year, the greenback was used in 40% of worldwide international payments, followed by the euro at 34.42%; the pound is at a distant 6.6%, while renminbi-denominated payments account for 1.95%.

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