Masaaki Yoshimori
The United States dollar has long held its position as the world’s dominant currency. This is mainly due to the vast size and stability of the US economy and the unmatched liquidity of its financial markets. These factors have solidified the dollar’s supremacy in international trade and finance, with the US economy valued at over $25 trillion. However, in recent years, two other currencies — the European euro and the Chinese renminbi — have emerged as potential challengers to the dollar’s supremacy.
The euro, underpinned by the Eurozone’s robust institutional framework, offers political stability and a solid monetary authority. These traits make it a compelling candidate for a global reserve currency. Nevertheless, the structural and political fragmentationwithin the European Union and divergent fiscal policies among its member states undermine the euro’s reliability as a universal reserve asset. As of 2023, the euro accounts for just 21% of global foreign exchange reserves compared to the US dollar’s commanding 58%. Even with the issuance of 400 billion euros (over $447 billion) in jointly backed debt during the Covid-19 crisis, the Eurozone still lacks the deep and liquid debt markets needed to elevate the euro’s status as a reserve currency.
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