Global Reserve Currency – Where the East meets the West

Disclaimer: This article is written by Taha Ragheb. Any views and opinions expressed in this article are those of the writers and do not necessarily reflect the views or positions of the team editor nor any entities they represent.

As new technologies emerge and economies across the globe continue to grow, world leaders display a trend towards a change in attitude concerning currency. Of these leaders, the affinity between Russia and China continues to develop as they push forward peace and trading deals with countries that previously had no such relations. So what does this mean for the future of global trade?

For around 80 years, the American Dollar has remained the global reserve currency, meaning the Dollar has been used widely by a majority of countries for international trade and held in their central banks. However, with the recent news surrounding Russia and China’s ‘responsible dialogue’ agreements, the future of reserve currency does not seem entirely steady. Some argue these nations are pushing for the Chinese Yuan to become the next reserve currency. Considering America has long decoupled the Dollar from the gold standard, many consider the Dollar to be becoming less stable. This is because the Dollar is currently backed by trust in the American economy, not by any physical or tangible product.

Some still argue that the Dollar will continue to remain the global reserve currency, however, Russia and China’s pursuit to strengthen the BRICS alliance, by brokering peace deals with long-standing enemies, Iran and Saudi Arabia, ushers in discussions of what this means and what interest this peace deal has on the Chinese Yuan. Yahoo finance reports that Vladimir Putin has been pushing for a new ‘international currency standard’, whilst China urges oil producers, prominently Saudi Arabia, to accept Yuan for payments, which was followed by a response from Saudi Arabia, stating that they are ‘open’ to the idea of trading in currencies besides the US Dollar.

Certainly, this spells a concerning future for America as they could lose global power through such a change. However, a change is still a long time away.