US Reserve Currency Status
Robin J Brooks | Substack • • business
Key Points:
- In the aftermath of the chaotic reciprocal tariff rollout and a tumbling Dollar, there was widespread debate about whether the US Dollar would lose its reserve currency status, potentially to the Euro.
- Reserve managers, who oversee official foreign exchange reserves for countries like China and Japan, play a crucial role in maintaining the Dollar's status by deciding the currency composition of these reserves, typically acting cautiously and avoiding reaction to short-term market news.
- The secretive nature of reserve management means these managers are unlikely to respond quickly to market turmoil unless a catastrophic event occurs, suggesting the US Dollar's reserve currency status is more secure than commonly perceived.
- Data from the IMF’s quarterly survey on FX reserve allocations, adjusted for valuation effects, indicate that apparent shifts
