The Risks of Relying on the US Dollar as the Global Reserve Currency

The Risks of Relying on the US Dollar as the Global Reserve Currency

the rapid growth in foreign exchange reserves and global markets, but express concern over their heavy dependence on the US dollar, which accounts for around 62% of total reserves. This introduces significant risk, as the dollar's volatility during economic crises can lead to a decline in the real value of these reserves. Additionally, major holders like China have the potential to strategically manipulate the dollar to serve their interests, a scenario referred to as the 'Chinese nuclear option'. While this gives China leverage, it also ties its economic stability to the US currency, creating risk for both the holder and issuer of the dominant reserve currency.

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