World is turning its back on the dollar, Saxo Bank FX strategist writes
World is turning its back on the dollar, Saxo Bank FX strategist writes by Chris Powell – GATA
hree Reasons the World Could Turn Its Back on the U.S. Dollar
By David Reid
CNBC, New York
Wednesday, October 11, 2017
A combination of geopolitical pressures could spark the end of the U.S. dollar as the world’s reserve currency, according to the head of foreign exchange strategy at Saxo Bank.
In a quarterly outlook note titled “The World Is Turning Its Back on the Almighty Dollar,” John Hardy claimed the U.S. currency was “increasingly dysfunctional” and there was an urgent need to replace it.
The currencies analyst highlighted these three geopolitical issues currently putting pressure on the dollar’s status:
“– The ongoing rise of China as it assumes a more prominent role in global trade and financial markets and in particular how it will manage policy and unwinding the excesses of its credit bubble in the wake of the 19th Party Congress scheduled for October 2017 without upsetting its domestic economy and the global economy.
“– The North Korean regime’s striving to maintain credibility and untouchability as a nuclear power and how this impacts China-U.S. relations, but also how Japan deals with this threat in terms of domestic as well as foreign policy,
“– The loosening of the U.S.-Europe transatlantic alliance and how Europe and the European Union find their feet as a more independent superpower — or not — in their own right after the German elections.”
Hardy extracts “de-dollarization” as a direct theme that can be pulled from China’s situation as the country looks to encourage demand for its yuan.
“China is eyeing the benefits of having its own currency play a larger role and to supplant the U.S. dollar’s role in global trade,” he said. “The initial focus is on the global oil trade, where it has announced the intention of buying oil in yuan and allowing trade partners to settle that yuan in gold.”
Hardy said settling in gold is a clever move by Beijing as it provides oil-exporting countries with a greater degree of comfort. …
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