That’s the topic of my latest Bloomberg column, here’s an excerpt:
How far will the de-dollarization conversation go? Probably not a lot. The United States has the deepest and most liquid financial markets in the world, and they remain relatively open, despite some restrictions on Chinese investment in industries sensitive to national security. There are strong reasons for having a dominant currency in international markets, just as there are strong reasons for having a dominant currency in internal transactions within the US. The liquidity of a currency begets more liquidity, either in the country or in the world.
With the dollar estimated at 88% of all international transactions, the euro at 31% is only a modest competitor (since a transaction can involve two currencies, the total can exceed 100%). The euro, unlike the dollar, will never be tied to a single national government, and the European Union comes nowhere near the military might of the United States.
Those are all common sense and intuitive points.