Challenge to dollar supremacy a long way off, central bankers say
US President Donald Trump's unpredictable economic, trade and security policies have spurred questions over whether the US currency, which accounts for 58% of the world's reserves, can remain at the centre of the global monetary system.
European Central Bank President Christine Lagarde, who has argued the euro could over time become an alternative to the dollar if Europe's currency zone enacted necessary reforms, said 2025 could in future be viewed as "pivotal" in this respect.
"(But) for a major change to occur it will take a lot of time and a lot of effort," she told a panel with her U.S., British, Japanese and Korean counterparts.
She noted that "investors are looking at options" in a climate characterised by uncertainty and unpredictability and that there was evidence that the euro was benefiting from that.
"It's not going to happen just like that overnight. It never did historically," she said. "But there is clearly something that has been broken. Whether it is fixable, or whether it is going to continue to be broken - I think the jury's out."
Bank of Japan Governor Kazuo Ueda also noted that any significant change would depend on structural reforms.
"It's to a certain extent up to what areas like Europe or China will do in terms of improving the efficiency or convenience of their currencies," he said, citing as an example the efforts at capital market integration in the euro zone.
Bank of England Governor Andrew Bailey said any change to the dollar's status was a long way off.
"I don't see ... a sort of a major shift at the moment," he said, arguing that any reserve currency had to offer a supply of safe assets into the market that can be used for purposes of collateral and security.
Bank of Korea Governor Rhee Chang-yong said the prospect of a long-term shift of the dollar sentiment was a subject of discussion for some even as they retained their dollar holdings.
"It looks like people are talking about it. But at this moment they keep the dollar share while increasing their hedging ratio," he told the panel.
Lagarde told a recent audience in Berlin that there was an opening for a "global euro moment", if it earned it.
She said Europe would need to build a deeper, more liquid capital market, bolster its legal foundations and underpin its commitment to open trade with security capabilities.
While the dollar's current share of international reserves is the lowest it has been in decades, its 58% tally is still well above the euro's 20% share.
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