Has the dollar lost ground as a dominant currency?
Eswar Prasad, in this note, sheds some light on that question. He argues:
- The recent seemingly precipitous four-percentage-point decline in the dollar’s share of global FX reserves, from 66 percent in 2015 to 62 percent in 2018, is probably a statistical artifact related to changes in the reporting of reserves;
- This shift in the dollar’s share was likely affected by how China and other previous non-reporters chose to report the currency composition of their reserves, which they did gradually over the 2014-2018 period;
- By some measures, the dollar has regained its status as the dominant international payments currency, displacing the euro. For instance, from 2012 to 2019, the dollar’s share of cross-border payments intermediated through the SWIFT messaging network has risen by 10 percentage points to 40 percent, while the euro’s share has declined by 10 percentage points to 34 percent.
Has the dollar lost ground as the dominant international currency?
Author: Eswar Prasad
From: Cornell University
