US Dollar to Retain Top Spot for Currency Reserves, Euro and Renminbi to Gain
According to a survey by UBS, the US dollar is likely to maintain its position as the leading currency reserve globally for the next 25 years. Meanwhile, the Euro and Renminbi are likely to see their share in currency reserves climb higher over this period as well.
Leading central banks around the world hold global currency reserves in order to back their liabilities, and any buying or selling of these reserves can cause a fluctuation in exchange rates in the forex market. Around 60-65% of global currency reserves are maintained in the form of the US dollar, according to data reported by central banks to the IMF.
The dollar’s share is expected to slide lower gradually as central banks look to diversify their currency reserves in the coming years. Presently, around 20% of currency reserves are maintained in the form of the Euro while the Renminbi accounts for around 2% of the market share.
Although UBS expects the US dollar to retain the top spot as the most preferred safe haven currency to turn to in times of high uncertainty in markets, central banks could increase their share of the Chinese currency to as high as 4.25% over the next few years.
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