The US Dollar remains by far the world’s preferred reserve currency, accounting for a share of 61.7%, but has shed a little of its importance (since spring 2015 around 4 percentage points). The Euro has recovered from the loss of confidence it experienced during the years of the EMU sovereign debt crisis, but has certainly not regained the ground it had at the beginning of the decade. The future looks set to belong to the alternative reserve currencies. Not just the Renminbi, but also the Yen could find new supporters. In my opinion, a change in the reserve currency regime away from US Dollars and thus an associated complete restructuring of the system is not on the cards in the foreseeable future.
To date, President Trump’s political style has hardly had a negative effect on the allocation of currency reserves. However, the USA’s increasing indebtedness could be a long-term disadvantage, as it lessens the appeal of the currency area. In this context the relative change in favour of other currency areas is again relevant and once more the USA is in good company. At present debt levels are rocketing in all the major currency areas. It is therefore important to return quickly to sustainable financial policies before the countries’ debt levels become a real problem.
Alongside fiscal policy, the impact of political decisions on social stability and the environment could play a more pronounced role in the future when it comes to allocating investments across currency areas. Because what is becoming ever clearer is that these factors exert an increasing influence on the countries’ long-term growth prospects.