Currencies

This month, Russia and China are sparking new jitters in Washington. That is primarily because of their stage-managed displays of diplomatic unity, around Ukraine and much else.But it is also down to money: during a visit by Xi Jinping to Moscow last week, Vladimir Putin pledged to adopt the renminbi for “payments between Russia and countries of Asia, Africa, and Latin America”, in a bid to displace the dollar. And this comes as Moscow is already increasingly using the renminbi for its swelling trade with China and embracing it in...

The dollar’s position is challenged by default fears, ‘petroyuan’ trade and central bank digital currencies But dollar dominance will be hard to overcome On the global stage, the dollar dominates. The US dollar is involved in 90 per cent of all foreign exchange transactions and almost half of world trade. As the chart shows, dollar assets make up 60 per cent of the world’s currency reserves, with the euro (at under 20 per cent) in distant second place. This puts the US economy in a unique and privileged position. As international trade is...

March 2023 | Vol. 12 / No. 6 PRICES & SPENDING By Andrew Alderman, Kevin M. Camp, and Erin Mandiak The value of a currency is an important determinant for prices in international trade. When the value of a currency changes, prices for goods traded using that currency can be affected. A currency appreciation (when the value increases over time) results in a lower effective price for imported goods; currency depreciation (when the value decreases over time) translates to higher import prices. By and large, firms across the world have...