Euro 20%, Yen 5.5%, Dollar Hits 20-Year Low
Central banks around the world are increasingly disfavoring the US dollar when allocating foreign exchange reserves.
The proportion of the dollar in global reserves has dropped to its lowest point in 20 years.
This is also reflected in China's foreign reserves, where the share of US Treasury bonds once exceeded one-third, but now stands at only about 25%.
As more countries are willing to use the Chinese yuan, a natural question arises: is the declining share of the dollar in global central bank reserves due to the rise of the yuan?
First and foremost, we must recognize that an increasing number of countries are actively working to de-dollarize.
Everyone is unwilling to bear the unknown risks of the dollar's future and does not want to be controlled by the dollar's influence on the trading market.
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The United States' recent aggressive interest rate hikes have increased the instability and risk in the global trade market.
Choosing other countries' currencies as foreign reserves is precisely to avoid such issues.
In essence, all of this is self-inflicted by the United States.
Due to a series of plans by the US government, the dollar has been weaponized, transformed from non-political to political, and used as a tool of hegemony to sanction and reap benefits from countries around the world, thereby affecting the status of the dollar as the world's currency.
The main reasons for this wave of de-dollarization are twofold.
First, the United States has always pursued a policy of quantitative easing, leading to domestic inflation, undermining the stability of the dollar, and affecting its credibility.
Second, the US government's economic strikes against Russia have made countries fully realize the extent of the damage to their interests caused by the United States using the dollar.
To avoid risks, people around the world are selling off their US Treasury bonds and reducing their holdings of dollars.
However, we also need to have a clear understanding of ourselves.
The status of the yuan is indeed continuously strengthening, but the change in its share in global central bank reserves is not the main reason threatening the dollar's position.
The shift in dollar foreign reserves is mainly due to the ongoing globalization of the monetary system, with foreign reserves of multiple economies on the rise.
The proportion of yuan foreign reserves has increased from 1.94% in 2019 to 2.69% now, although it has improved, the absolute value change is not significant.
In contrast, the euro's share has reached 20%, and the proportion of dollar assets in central bank reserves has decreased by 12% since the euro's inception.
Clearly, it is the euro that has taken away the dollar's share.
Currently, the euro ranks second in global currencies, just behind the dollar, posing a significant threat to it.
Precisely for this reason, the United States has taken advantage of European conflicts to aggressively suppress the euro, causing its exchange rate to plummet and European capital to flee wildly.
In addition, we must also see that a diversified currency structure is slowly taking shape globally, with the investment share of non-traditional reserve currencies on the rise.
In the current economic environment, the once mainstream international reserve currencies have not become more favored due to the decline in dollar foreign reserves.
Compared to these currencies, central banks seem more willing to increase non-traditional reserve currencies, including the South Korean won and the Australian dollar.
The reason for this move may be the rise of new technologies, making transactions in these small economies more convenient and cost-effective.
This is also very beneficial for us.
On the one hand, our foreign exchange reserves can be more diversified, including not only the dollar, euro, yen, and pound but also other currencies.
On the other hand, other countries have greater motivation to increase the proportion of the yuan when allocating foreign exchange assets.
It can be imagined that in the end, it is not the yuan that pulls the dollar down, but the collective effort of many currencies that makes the dollar step down from its pedestal.
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