Although the globalization structure is being reorganized around China and the theory of a dollar crisis is emerging, dollar hegemony is still solid in Europe. This is because dollars account for half of the international capital market. It is observed that the aftermath of the U.S. central bank’s interest rate policy will determine whether the European Central Bank (ECB) will tighten.
According to the Wall Street Journal (WSJ) on the 28th (local time), the influence of the dollar in Europe is still solid despite the trend of de-globalization. This is because the dollar dominates the global capital market. Transactions using alternative currencies are increasing in the raw material market, but still
After the Ukraine war broke out last year, the global structure was reorganized, and headwinds against dollar hegemony intensified. The proportion of dollars used in international product transactions has decreased. Russia, China, India, and Saudi Arabia began to sign raw material contracts in rouble and yuan.
As alternative currencies expanded, the size of holding dollars also decreased. The dollar’s share of the world’s central bank’s foreign exchange reserves fell from 72% 20 years ago to 60% in the second quarter of last year. In the fourth quarter of last year, it fell to 58%, the lowest level in 20 years.
However, the dollar remains the world’s dominant key currency. Half of the world’s trade is traded in dollars, and half of international securities and bonds are issued in dollars. Ninety percent of the world’s foreign exchange transactions are made in dollars, and the figure has not changed for 20 years.
The dollar hegemony on the capital market has also spread to the economies of each country. If the dollar price changes, a large amount of capital outflows from countries outside the United States. Borrowing costs increase and the value of the country’s currency sharply falls against the dollar. According to the ECB, about a third of the changes in U.S. money market fund (MMF) interest rates are passed on to German interest rates.
