International Monetary Fund Managing Director Kristalina Georgieva said on Wednesday that the US dollar is likely to remain the world's reserve currency despite increasing discussion about countries' moves to reduce their dependence on the dollar, known as "de-dollarization".
"We do not expect a rapid shift in dollar reserves because the reason that the dollar is a reserve currency is due to the strength of the US economy and the depth of capital markets," she said, at the Qatar Economic Forum in Doha, organized by Bloomberg Agency, adding ‘Don’t kiss your dollars goodbye just yet'.
Rick Rieder, chief investment officer, global fixed income at BlackRock warned that defaulting on US debt could also weaken the dollar's influence as the world's reserve currency.
"When people ask whether the dollar will lose its status as a reserve currency, I think that's questionable," said Rieder. "However, we continue to undermine the dollar's impenetrable shield."
Meanwhile, there is an ongoing global debate about de-dollarization, as countries line up reserve currencies for trade amid fears Washington may weaponize the dollar in the wake of the Russia-Ukraine war knowing that alternative assets are undermining the dollar's leadership, including assets such as the Chinese yuan, the euro, cryptocurrencies and gold, according to experts.
Notably, in March, the yuan became the most used currency by China for cross-border payments, overtaking the US dollar for the first time. This increased use of the Chinese currency coincided with the government's renewed push for the internationalization of the renminbi.
This came during a discussion session on the repercussions of a US debt default - a risk hanging over the markets amid intense negotiations between Democrats and Republicans over raising the debt ceiling.
One of the effects pointed out by the experts was the downgrade of the credit rating of US Treasury bonds as it would be a big deal due to the way international investors and other central banks view US debt and it may also affect the Treasury market.