Dollar as Reserve Currency: Mixed Signals

Conjecture is once again rife that we are reaching the end of the era of the dollar-centric global currency system. And while previous reports of the death of the dollar as the global reserve currency were greatly exaggerated, the system is showing signs of stress. Huge cross-border capital flows that only partly reflect economic fundamentals are resulting in exchange rates out of line with fundamentals for sustained periods. Volatility and uncertainly is hindering decision-making. Questions are being asked about the risks being placed by countries holding much of their reserves in dollars.

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