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Don’t worry about dedollarization – the yuan has a ‘paltry’ share of reserves, so the buck is going nowhere, RBC says
George Glover
Oct 10, 2023, 7:33 AM EDT
- De-dollarization talk has gathered steam – but there’s little reason to worry, according to RBC Wealth Management.
- The rival yuan doesn’t pose a credible threat to the buck, strategist Alan Robinson said in a recent research note.
- “While China would like its renminbi to topple the dollar, that currency’s share of global reserves remains a paltry 2.5%,” he wrote.
All the de-dollarization talk of the past few years is probably just noise – because no other currency will be able to unseat the greenback, according to RBC Wealth Management.
Global portfolio manager Alan Robinson said last week that rivals like the euro, the Japanese yen, and the Chinese yuan don’t hold a big enough share of the world’s reserves to give fans of the buck any cause for concern.
“What could replace the dollar as a reserve currency? The two closest challengers, the euro and the yen, have grown their share of reserve holdings, but not to the extent of the dollar’s losses,” he said in a research note seen by Insider.
“And while China would like its renminbi to topple the dollar, that currency’s share of global reserves remains a paltry 2.5%, although certain authoritarian regimes seem increasingly attracted to the currency.”
“We don’t think any single currency is positioned to replace the dollar in the global reserve system,” Robinson added.
The dollar still accounts for over half the world’s total reserves even though its dominance has steadily declined since 2000, according to data from the International Monetary Fund.
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The greenback had a 59% share of global reserves at the end of the second quarter of 2023, per the IMF. That dwarfs the combined share of 27% held by the euro, yen, and yuan.
The buck has clung onto its role as the dominant global currency despite China and Russia stepping up their efforts to undermine it since the Kremlin invaded Ukraine in February 2022.
Beijing called for oil suppliers in the Middle East to accept the renminbi rather than the dollar in crude trades back in December, while Moscow forbids so-called “unfriendly” countries from settling natural gas contracts using any currency other than the Russian ruble.
Source: Markets Insider
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