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Moody's explained what the secret of the power of the dollar
Material posted: Publication date: 13-09-2018
About the place of the dollar in world trade and reserves discussions in which the countries striving to move away from the currency of the hegemon, decided unequivocally answer Moody's Investors Service, new York Agency of the "big three" international credit rating agencies.

The response from the citadel

To date, only the dollar is able to ensure maximum convenience and price advantage in international trade, and its share in global reserves has remained inaccessible to alternative currencies, said the international rating Agency Moody's Investors Service. According to RBC with reference to the text of his new study, it will be decades before the world's Central banks will be able to change these proportions.

Of course, now many regional currencies are gaining strength, a number of countries trying to move to settlements in their currencies, noted in this study. As a result, Moody's recognizes, the need for the use of the dollar in global trade may decline, especially against the background of increasing regional trade and new currency such as the yuan a reserve status.

The position stated in the study rating agencies of the "big three", looks like almost a veiled response to the position of a number of countries, primarily the BRICS countries, seeking to go in the calculations together with the national currency and the questioning of the reserve function of the dollar. Especially a lot of doubt in the future of the dollar as a reserve currency had appeared in connection with the sanctions that the United States became easily "give" left and right. This was discussed at the recent summit of the organization held in late July in Johannesburg.

For their part, the experts of Moody's Investors Service saying that the dollar will remain the de facto world reserve currency, which is already more than sixty years, and in the foreseeable future. It accounts for 63% of global foreign exchange reserves, the second place — Euro (20%) refer to the rating Agency on IMF data. The share of any other counterparts does not reach 5%, and the potential for their release in the first place in the world will be limited.

Moody's, whose headquarters is located in new York, list the factors that ensure the strength of the dollar: the size of the American economy, the country's role in world trade, the transparency of the us financial market and how they think, predictability and reliability of monetary policy. Expressed this view: the current structure of the US economy provides stability to the trade deficit, which is an additional support for the dollar.

In itself, the entry of international rating agencies in the discussion of the role of the dollar shows that in the case of a serious threat to the status of the American currency will be ready to defend both formal and informal institutions. The arguments have, of course, will not only verbal, but strong arguments in favor of a different perspective there too.

These talks are the last decade, almost without interruption, but the dollar still maintains its position, recognizes a senior analyst "Alpari" Anna Bodrov. The yuan still need some time — from seven to ten years, on promotion on the world stage. While the Chinese currency is controllable and dependent on the people's Bank of China, "world domination" speech can not go. Euro in this case is not considered because of its mobility, she said.

Rival the dollar in the long term could be the pound sterling, the expert believes, but because of the processes of Brexit its prospects for the next five years is also uncertain. It turns out that still no real competition to the dollar in the global calculations is not, although it is recognized that its share in the world trading system is in decline as countries move to settlements in national currencies.

The opportunity to oust the dollar other countries have

The advantages of the dollar, Moody's analysts listed, you can add the fact that the prices of many raw materials, including oil, are formed in dollars, and trade is conducted in dollars, says the financial consultant TeleTrade žanna Kulakova. There is even a special term – petrodollars, which refers to US dollars, derived from oil exports. It is believed that after the abolition of the gold standard, the dollar is supported by the global demand for oil. And the decline of the dollar in the world economy may be possible, including, and due to the transition to payment for oil in other currencies. Only now are you ready for the exporters and importers of oil? Because the inflow of export proceeds in foreign currency is one of the factors ensuring the stability of the national currency of the exporting country.

The transition to payments in alternative currencies applies not only to the oil market, but also other goods and services, adds the economist. To date the largest importers and exporters in the world, besides the US are such countries as China, Japan, South Korea, Hong Kong, UK, some countries in the Eurozone. Accordingly, these countries (and each of them has its own national currency) have the most potential to influence the dollar's share in international payments.

Another important factor is the structure of world currency reserves. The largest reserves have China, Japan, Saudi Arabia, Russia, Brazil, India and some other countries. If desired, they can significantly change the structure of its reserves, reducing the share of dollar and increasing the share of other currencies. Just remember, warns Jeanne Kulakova, that, firstly, the list of alternative currencies is strictly limited to the IMF methodology, and secondly that the reserves – this is serious, and the dollar has already established itself as a highly reliable tool of formation of financial "safety cushion" at the state level.

The opportunity to oust the dollar from other countries, but here they are in no hurry to use them, she says. Some attempts taken by China, Iran, Russia and other countries, do not give noticeable result. You got to admit that the use of predominantly U.S. – conveniently and reliably, and it is unlikely in the nearest future something will change dramatically.

Perhaps one of the above countries a real competitor to the American currency could theoretically be China and the yuan – it has the status of reserve currency, while China is a major player in the global oil market and, in General, international trade, and has vast foreign exchange reserves. Only here the credibility of the yuan a little bit, and here the question is political rather than economic: in today's world communism is in great confidence.

Growing sanctions risks

So what is Moody's right that the dollar in the foreseeable future will remain the reserve currency and the dominant currency of foreign trade, said the expert of the International financial center Vladimir rojankovsky. But how long depends on the United States. The sanctions risks in the dollar rising in proportion to the frequency of use it as a "sanctions stick". This is not an isolated problem of Russia or Iran, but the problem of non-us global economy – in particular, the European (remember the story of a serial sanctions against Deutsche Bank and BNP Paribas).

Moody's, believes Vladimir rozhankovsky, in its conclusions, underestimates the growing popularity of hedging instruments exchange rate risks, which allow trading countries to minimize the damage caused by depreciation of national currencies without the need to conduct international transactions with the mediation of the dollar.


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