© Reuters. FILE PHOTO: U.S. Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration
FRANKFURT (Reuters) -The United States and the euro zone should not take the international status of their currencies for granted as countries such as China and Russia seek to create their own systems.
The dollar’s 80-year-old reign as the world’s reserve currency is being called into question by some commentators in light of China’s rise as a global power, burgeoning debt at home and geopolitical challenges to Western influence from Ukraine to Taiwan.
Lagarde said “a new global map” was being drawn, with some countries seeking alternative invoicing currencies such as the as the Chinese renminbi or the Indian rupee, accumulating gold or setting up their own payment systems.
“These developments do not point to any imminent loss of dominance for the U.S. dollar or the euro,” Lagarde said in a speech. “So far, the data do not show substantial changes in the use of international currencies.”
“But they do suggest that international currency status should no longer be taken for granted,” she said at the Council on Foreign Relations in New York.
Around 60% of the world’s foreign exchange reserves and international debt is denominated in dollars, with the euro a distant second at 20%, according to data compiled by the ECB.
U.S. authorities have so far dismissed the notion that the greenback’s global primacy, born with the Bretton Woods agreement of 1944, was about to end and even suggested it could be bolstered by the launch of a digital dollar.
The ECB also hopes an electronic version of the euro could boost its use abroad, although it has cautioned this would also come with risks such as opening a gateway for money laundering or facilitating runs on weaker currencies at times of crisis.