Dwindling global trust in the US dollar is one of the most prominent risks facing a vulnerable world economy this year, according to Zhu Min, an ex-deputy director of the International Monetary Fund and former deputy governor of the People’s Bank of China.
He noted that the credibility of the US dollar was being challenged as its share of global foreign exchange reserves had fallen to 57 per cent – a decline from 70 per cent in the past.
On the other hand, “the proportions of gold, the euro and the yuan are rising, reflecting the market’s confidence that the US dollar is dropping”, Zhu wrote in an article in China’s International Finance magazine on Wednesday.
Zhu added that the Federal Reserve’s interest rate cuts would be a critical measure for steadying the financial market this year.
“But if the pace of interest rate cuts does not align with the inflation situation, it will create new uncertainties,” he warned.
Chinese President Xi Jinping said that China must build a “strong currency” that can be widely used in international trade, investment and foreign exchange markets and reach the status of a global reserve currency.