Fed Chair Powell Says US Dollar Will Remain World's Reserve Currency
On Wednesday, Fed chair Jerome Powell talked about how he believes that the US Dollar will maintain its role as the world's reserve currency. He added that as long as the rule of law and democratic institutions in the US remain effective, the US Dollar dominance will remain!
Powell added that the US Dollar's status as the reserve currency of the world is very important for the Fed and the country. In his opinion, the biggest reason for this strength of the US Dollar is the rule of law, democracy, and price stability in the country. He shared these views during this speech at the House's Committee for financial services.
Dollar's Dominance In Danger
Although Jerome Powell is confident about the US Dollar's strength, the actual data says otherwise. If we look at the data from Q4 2022, the share of the US Dollar as part of foreign services is now standing at 58%, which is a 20-year low. This data regarding the FX reserves was shared by the IMF which tells us that it is pretty accurate.
It appears that even Jerome Powell knows about this as he talked about how the status of global reserve currency continues to change through the course of history. That's why he added that it can't be considered a permanent status. However, he believes that it is a long-lasting one in the case of the US Dollar.
The reason behind the strength of the US Dollar is open capital accounts, price stability, the rule of law, and democracy in the USA. At least, that's what Jerome Powell believes is the reason behind the dominance of the US Dollar.
He said that as long as the US government continued to uphold these values, the US Dollar's status as the world's reserve currency will also remain in place.