Dollar Economic weapon FX reserves Reserve currency

The western sanctions freezing large parts of Russian foreign reserves explicitly used currencies as economic weapons. In the short term, this is unlikely to affect the dominant role of the US dollar as an international reserve currency. Compared to other currencies, the US dollar is still most in line with the requirements that a reserve currency must meet. It is based on a large economy, with well-developed and liquid financial markets and a strong geopolitical status. The fundamental trust in the protection of investors’ property may have experienced a setback by the sanctions, but that also applies to the currencies of other sanctioning Western countries. Cryptocurrencies, gold and the IMF’s Special Drawing Rights are no satisfactory alternatives either, each for their specific reasons. Therefore, in the short term, the most likely evolution is a continuation of the current status quo. In the longer run, changes may well occur and are unlikely to happen in an orderly way.


03 guffens

Dieter Guffens

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