The United States must brace itself for the dollar to be usurped as the world's reserve currency as American dominance wanes in the wake of the financial crisis, the World Bank president, Robert Zoellick, warned yesterday.
Speaking ahead of the World Bank/IMF annual meetings in Istanbul, he said it was time for a "responsible globalisation", in which decision-making was shared between the old powers and developing countries such as China and India.
Ever since the post-second world war Bretton Woods agreement, which cemented the dollar's ascendancy over sterling, Americans have been able to rely on borrowing cheaply from the rest of the world as governments banked on the dollar as a safe bet. But Zoellick said the greenback's status could be under threat from the growing strength of the Chinese yuan and the euro.
"The United States would be mistaken to take for granted the dollar's place as the world's predominant reserve currency. Looking forward, there will increasingly be other options to the dollar," Zoellick told an audience at Johns Hopkins University in Washington. From now on, he said, confidence in the US currency – and its economy – would have to be earned. "The future for the United States will depend on whether and how it will address large deficits, recover without inflation that could undermine its credit and currency, and overhaul its financial system."
Zoellick's comments came as Beijing launched the first yuan-denominated bond available to outside investors, as it gradually makes its currency more exchangeable on international markets.
"I expect China will inevitably be drawn outward," he said. "Over 10 to 20 years, the renminbi [yuan] will evolve into a force in financial markets."
Several countries, including China and Russia, have repeatedly raised what they see as the problem of excessive dollar hegemony.
No comments:
Post a Comment