Dominance of dollar

Hegemony[hi'je-mu-nee(dominance,प्रभुसत्ता)] is defined as political, economic or cultural dominance or authority over others. When applied to the current global economy, hegemony refers to the primacy of the American dollar in relation to other currencies. The dollar has remained the superpower of the financial and monetary system.
Statistics are revealing. There are seven major reserve currencies. Apart from the dollar, the reserve currencies are the euro, British pound, Japanese yen, Swiss franc, Canadian and Australian dollars. About 62 per cent of international currency assets are held in U.S. dollars, 23 per cent in euros and four per cent in yen and sterling. Almost two thirds of India’s forex reserves are said to be in dollars.
To qualify as a reserve currency, the country must run a large current account deficit which will be easily financed by other countries desiring to park their reserves in that currency.

doubts have been raised as to the stability of the system presided over by the dollar. As the Economist in a recent special issue (October 3 to 9) points out a ‘fault line’ has opened between America’s economic clout[klawt(special advantage,फायदा)] and financial muscle. The U.S.’s share of global GDP is 23 per cent and its share of global merchandise trade is 12 per cent. Those are impressive numbers but not sufficient to reinforce[ree-in'fors(strengthen,मजबूत)] its number one position when one considers that 60 per cent of the global output lies within a de facto[di'fak-tow(real,वास्तविक)] dollar zone (currencies are either pegged to the dollar or move in tandem[in tan-dum(one behind other,एक के पीछे एक)] with it).
As the Economist puts it succinctly[suk'singkt-lee(concise and precise,संक्षेप में)] the costs of dollar dominance are starting to outweigh the benefits,

As seen in India too, currencies and stock markets suffer wild gyrations[jI'rey-shun(rotation,चक्कर)] . A miniscule[mi-ni,skyool(small,थोडा)] rise in the American interest rate or even a talk about it is enough to cause huge reverse flows of dollars invested elsewhere. Share prices go downhill very fast.

Second, there are limits beyond which the U.S. can make up for liquidity shortage in the global financial system which has grown enormously[i'nor-mus-lee(hugely,अधिकता)].

Three, America’s political system is seen to be dysfunctional. The question needs to be asked for how long countries will tie their financial systems to the vagaries[vey-gu-ree(ups and down,उतार चढ़ाव)] of U.S. politics.Finally, the U.S. is not averse[u'vurs(unwilling,अनिच्छुक)] to using its financial clout to achieve political objectives.

However, over the years no other currency, not the euro not even the much touted[tawt(advertise,प्रचार)] yuan can occupy that place.
Sooner rather than later the yuan will acquire reserve currency status. However the recent slowing down of its economy as well as the series of currency devaluations have lent some opacity[ow'pa-su-tee(unclear,अस्पष्ठता)] to China’s macro management. The yuan has some distance to go before it qualifies as a global currency.

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