DA: Recently we saw the United Arab Emirates decide to diversify its foreign currency reserves away from dollars, something other Asian central banks have been doing for a while now. Do you expect this trend to continue, and how will it affect the global economy?
EY: It’s natural that as people and businesses become wealthier and more prosperous, they will want to diversify their portfolios. None of this should really lead to any dire consequences – quite the opposite, I think it should make for a more sustainable, balanced global boom. The dollar, relative to some currencies, particularly the euro and some of the Asian currencies, may continue to weaken. It might also do so on a trade-weighted basis if the Chinese let their currency appreciate more rapidly. The Thai baht crisis last year was reminiscent of what happened in 1997. Back then, the Thai currency was under downward pressure. This time, the baht and other Asian currencies have been strengthening. This should encourage Asian economic policymakers to increase domestic demand. I don’t see anything wrong with any of this.
Via Managing Globalization
Related;
Is the Dollar Dead?
Call me Ahab (q3 IMF COFER data)
The Chart above from NABE; US Dollar Exchange Rate: Trade-weighted broad currency index
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