The U.S. dollar's dominant reserve currency status is likely to endure partly because even the most talked about alternative the Chinese yuan falls short as a credible challenger, Morgan Stanley said in a report Thursday.
The U.S. dollar's dominant reserve currency status is likely to endure partly because even the most talked about alternative the Chinese yuan falls short as a credible challenger, Morgan Stanley said in a report Thursday. Rivalry with China, Russia's war in Ukraine, wrangling in Washington over the U.S. debt ceiling and rising debt levels have put the dollar's status as the world's dominant currency under scrutiny in recent years.
Concerns about the U.S. fiscal outlook and the persistent use of economic sanctions by Washington could motivate some countries to seek alternatives to the dollar, but it is is a difficult task, Morgan Stanley said. "But we think that China’s ‘3D challenge’ of debt, deflation and demographics will limit CNY's international appeal," the note added, estimating that currency reserves in yuan should rise to only 5% in 2030 from 2.3% now.
Currency Reserve Dominance Morgan Stanley
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