U.S. Dollar's Future as the Global Reserve Currency

The U.S. dollar has been the preferred global currency since the end of World War II, providing our nation with inherent economic advantages as well as responsibilities. Today, an estimated 88 percent of all currency transactions by value are conducted in U.S. dollars. Among other things, this limits the risk of a balance-of-payments crisis, which inherently lowers our exchange rate risk. The dollar's position also allows the United States and Americans to borrow at rates such as 50 to 60 basis points lower. The role of the dollar reflects global confidence in the U.S. Federal Reserve (Fed) as an institution and the U.S. economy and financial markets. The dollar's global role also reflects continued U.S. global economic and financial leadership. Changes in the global economy, and geopolitical shifts could cause a shift from the dollar to other currencies. Focus in particular is centered on China's economic rise, U.S. sanctions, and digital currencies.