Two JP Morgan strategists have said the U.S. dollar will retain its dominant position even as it is being challenged by alternative currencies such as the Chinese yuan. According to a report, the yuan currently accounts for just 7% of global foreign exchange trade volumes while the greenback is just “shy of record highs at 88%.”
Greenback’s Dominant Position Challenged
Strategists at JP Morgan have said the U.S. dollar will likely retain its dominance despite the ongoing attempts to replace it with an alternative reserve currency. In their latest note, strategists Meera Chandan and Octavia Popescu point to the greenback’s share of foreign exchange trading volumes which stands at 88%.
Meanwhile, a Reuters report also pointed to the greenback’s use in trade invoicing as another factor that backs Chandan and Popescu’s U.S. dollar prediction. However, the strategists did acknowledge that the greenback’s position will still continue to be challenged.
“Some signs of de-dollarization are emerging,” the strategists are quoted as saying.
As has been reported by Bitcoin.com News, opponents of a U.S.-dominated financial system have been pushing for a reserve currency that challenges the dollar’s dominant position. While some have named the potentially upcoming Brazil, Russia, India, China, and South Africa (BRICS) money as the currency that will finally topple the greenback, others have said China’s yuan is more well-positioned to achieve this.
Yuan’s Share of the Global Total
However, according to the report, the yuan currently accounts for just 7% of global foreign exchange trade volumes. In contrast, the European Union currency, the euro, accounts for 31% of forex traded volumes.
Meanwhile, the two JP Morgan strategists warned that China’s capital controls mean the Asian country’s currency is unlikely to topple the U.S. dollar in the foreseeable future. To back their argument, the JP Morgan strategists point to data which suggest that China’s CNY only accounts for 2.3% of SWIFT payments. The U.S. dollar and the euro, on the other hand, account for 43% and 32% of SWIFT payments, respectively.
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