Famous economist Jim O’Neill stated Tuesday that investors “have to believe” the dollar is not going to be the kingpin currency forever.
The greenback’s status as the world’s most effective currency has been questioned for decades, but contracts based on the U.S. dollar continue to dominate global marketplaces. However, lately, speculation has intensified that China could be poised to produce a major approach against the dollar’s dominance.
When asked to what extent he felt the dollar’s influence could be dwindling, the former chairman of Goldman Sachs Asset Administration told an crowd at the Abu Dhabi International Petroleum Exhibition Meeting (ADIPEC): “I hold two contradictory views upon this. Firstly, it’s hardly ever going to happen because the dollar is the dollar.
“However… Germany has become China’s number one trade partner and it is when you learn to see things like this that you have to believe the dollar is not going to be kingpin in the future like it is today.”
China is the world’s leading oil importer, therefore Beijing sees it as only logical that its currency should price the global economy’s most important commodity. But beyond that, moving away from the dollar is definitely a strategic priority for countries like China and Russia. Both try to ultimately reduce their dependency on the greenback, limiting their contact with U.S. currency risk and the politics of American sanctions regimes.
The program is to price oil in yuan by using a gold-backed futures contract in Shanghai, but the road will be long and arduous.
“I don’t believe you can say with confidence that over another decade the dollar is finished, but the ongoing geopolitical developments suggest that could change in the foreseeable future,” he said.
– CNBC’s Sri Jegarajah contributed to the report.