Is the US dollar in danger of losing its reserve currency status? This is the question posed by the currency’s recent fall: it has dropped more than 3 per cent on its trade-weighted index in the past three months, and has lost almost 7 per cent against the euro.
There seem to be reasons why it should lose this privilege. Years of external deficits mean the US is now a huge net debtor: latest figures show that its overseas liabilities exceed its assets by over $12 trillion. And the country’s mishandling of the Covid-19 outbreak have fuelled talk that it is a failed state – talk intensified by President Trump’s threat last week to postpone November’s elections.
In truth, though, the dollar is likely to remain the world’s reserve currency for some time.