South Korean Central Bank: Dollar Status May Fade over Time

From Reuters
via Yahoo News
Sunday, February 28, 2010

The world could see multiple reserve currencies sharing the leading status 20 to 30 years from now, due to weakening confidence towards the dollar and the rising influence of other currencies such as the euro and yuan, it said.

"The global monetary order is expected to enter into a multi-currency system with currencies such as the dollar, euro, and yuan competing to become the leading reserve currency," the Bank of Korea report said.

It said the weight of dollar assets in global foreign reserves had already fallen to 61.6 percent by the end of September 2009 from more than 80 percent in 1977, whereas the euro has risen to 27.7 percent from 17.9 percent in 1999.

It is rare for the Bank of Korea, which manages the world's sixth-biggest foreign reserves, to publish a report commenting on such a sensitive topic, although the authors said the paper did not necessarily represent the central bank's stance.

There has been a heated debate around the world over whether the dollar deserves its current edge as the world's leading reserve currency even after a financial meltdown in the United States sparked a global crisis.

But a Reuters survey published in November last year also showed foreign exchange strategists expected the dollar's edge as the world's leading reserve currency would be chipped away only slowly.

The report suggested South Korea prepare itself for the changing global monetary order by boosting the use of other currencies in foreign trade and bolstering transactions of non-dollar currencies in the local market.