Despite the current political turmoil, the U.S. dollar will remain the world’s leading reserve currency for the next 25 years, according to a new report issued by Swiss bank UBS Group AG.
In the report, UBS states that the U.S. dollar will continue to hold its current position as the leading reserve currency, while the euro and China’s renminbi will each increase their share of total central bank reserves. The UBS report was based on a survey of sovereign institutions including major central banks.
Global reserves are assets of central banks held in different currencies primarily used to back their liabilities. Central banks have bought and sold international reserves to influence exchange rates. The U.S. dollar currently represents about 65% of global currency reserves reported by central banks to the International Monetary Fund.
That share may come down a bit over the next two decades, only because central bank managers would want to raise their holdings of other reserve currencies such as the euro and renminbi, said UBS in its report.
The euro and renminbi are likely to boost their share of global reserves, but at a gradual pace, UBS said. The euro’s share was around 20% at the end of the second quarter of 2019, while the renminbi was at 2%. The UBS report noted that the American dollar remains the “ultimate safe-haven currency” and during periods of intense global risk, investors flock to U.S. Treasurys.
