US dollar dominance is both a cause and a consequence of US power | Chatham House
Despite rising questions about the U.S. dollar’s future as the world’s leading currency, top central bankers say its dominance isn’t going anywhere—at least not for a long time.
Speaking at a major conference in Sintra, Portugal, central bank leaders from around the globe made it clear: the dollar still holds firm as the go-to reserve currency, accounting for 58% of global reserves. While that number has slipped slightly in recent years, it still towers over the euro, which stands at just 20%.
Can the Euro Take Over?
European Central Bank President Christine Lagarde acknowledged that 2025 could be seen as a turning point. She’s previously said the euro could eventually challenge the dollar—but only if Europe makes major economic and financial reforms.
“It’s not something that happens overnight,” Lagarde said. “But something has been broken. Whether it can be fixed or not, we don’t know yet.”
She pointed out that investors are keeping an eye on alternatives like the euro, especially in a world full of economic and political uncertainty.
Other Central Banks Weigh In
Bank of Japan Governor Kazuo Ueda agreed, saying big changes to the dollar’s role depend on how countries like Europe and China improve the usefulness and reliability of their currencies.
Bank of England Governor Andrew Bailey was even more direct: “A major shift is still a long way off.” He explained that reserve currencies need to provide safe, stable assets that can be used for trade and finance—something the dollar still does best.
Bank of Korea Governor Rhee Chang-yong added that although more people are talking about alternatives to the dollar, most are still holding onto their dollars while cautiously increasing hedging strategies.
A “Global Euro Moment”?
Lagarde recently told a crowd in Berlin that the euro could have its moment—if Europe steps up. She called for a stronger capital market, solid legal systems, and a mix of open trade and security capabilities to boost confidence in the euro.
While momentum is building for change, central bankers agree: replacing the dollar as the world’s main currency will take time, trust, and serious economic reform. For now, the dollar still wears the crown.
#USDollar #GlobalEconomy #EuroVsDollar #CentralBanking #CurrencyNews