The US Dollar and its Status as a Reserve Currency – An Analysis
The United States dollar has maintained its place as the world’s reserve currency for over half a century. This
status may be subject to change in the near future. As the U.S. faces economic problems as a result of using the benefits of
being a reserve currency, the idea of the dollar maintaining its dominance in the world no longer seems so certain. This paper
looks at how the dollar began to decline from its height of power and whether it can maintain its status in global finance. For
the dollar to cease being the world’s reserve currency, it follows that another currency must take its place in the financial
world. Alternatives to the dollar, such as the euro and Chinese RMB, have entered the world stage and intend to challenge
the dollar’s place on top of the financial world. Special Drawing Rights, a super-sovereign currency first introduced almost
fifty years ago as a reserve currency but soon marginalized, has returned as a possible alternative that presents a radical way
of doing world commerce going forward. This paper is an investigation into the strength of the dollar and into the viability of
a potential challenger to the dollar’s reign as a reserve currency.
Keywords— Reserve Currency, Dollar, Euro, RMB, Special Drawing Rights.