The dollar will increasingly see its role as the world’s sole reserve currency challenged by the euro and the renminbi, says World Bank President Robert Zoellick.
“The United States would be mistaken to take for granted the dollar’s place as the world’s predominant reserve currency,” he said in a speech cited by The New York Times.
“Looking forward, there will increasingly be other options to the dollar.”
As for the euro, it provides a “respectable alternative” to use in international commercial and investment transactions, Zoellick said. He sees “every reason to believe that the euro’s acceptability could grow.”
China’s currency will also present a threat to the dollar’s hegemony in the next two decades, Zoellick maintains.
While Chinese leaders have thus far limited the renminbi’s use in international transactions to maintain their control over exchange rates, the currency will nonetheless “evolve into a force in financial markets,” he said.
Zoellick blatantly questioned President Obama’s economic policies. “The greenback’s fortunes will depend heavily on U.S. choices,” he said.
“Will the United States resolve its debt problems without a resort to inflation? Can America establish long-term discipline over spending and its budget deficit?”
Others too see the dollar facing headwinds.
“We have concerns about the dollar,” James Holtzman of Legend Financial Advisors in Pittsburgh tells Moneynews.
“The huge deficits and debt don’t bode well for the dollar. Low interest rates won’t drive investors to the dollar either.”
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