The Dollar Is Still King: Ritholtz Chart

Barry Ritholtz is a Bloomberg View columnist. He founded Ritholtz Wealth Management and was chief executive and director of equity research at FusionIQ, a quantitative research firm. He blogs at the Big Picture and is the author of “Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy.”
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The U.S. dollar is still king of global currencies. The dollar made up 60.9 percent of foreign exchange reserves and was used in 42.1 percent of global payments. Some countries, though, contest how much influence the U.S. dollar really has.

The term "exorbitant privilege," coined by former French Finance Minister and later President Valery Giscard d'Estaing, refers to the benefits the U.S. receives as a result of its currency being the chosen reserve currency of the world. The term also reflects the discomfort some nations feel toward this financial favor.

What other options does the world have? Luckily, we have a chart.

The euro is the only currency whose use is remotely close to dollar and it isn't showing much strength lately. Some predict the euro's demise will come in the not-too-distant future.

The Japanese are having their own problems, so don't look to the yen as an alternative. The Chinese renminbi is smaller than both the Canadian or Australian dollar in global payments, and practically nonexistent as a reserve currency outside of China.

The Financial Times's Martin Wolf wrote: "For the first time since industrialization began two centuries ago, the world's largest economy seems certain to be that of a non-western developing country run by the communist party." But will China eventually supply the world's reserve currency? That's unlikely to happen anytime soon.

One day, some other currency may fill the world's reserves. For now, there are no credible challengers to King Dollar.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Barry L Ritholtz at britholtz3@bloomberg.net