Stock Market Today – BUZZ-COMMENT-Dollar is suffering a crisis of confidence

April 7 (Reuters) – The dollar’s share of global reserves is shrinking, partly from losses incurred by those who sought safety in the world’s reserve currency last year.

The dollar soared around 8% between January and April 2020 at the start of the coronavirus crisis, then slumped 11%. It started this year about 3.5% weaker than it was at the start of 2020.

For those who sought safety in the dollar, 2020 proved costly, and that’s undermined confidence in a currency whose value will surely be eroded by multi- trillions of U.S. spending and central bank stimulus. This provides potential challengers for global reserve status with an opportunity.

The euro has gained over 11% since the European Union agreed on common debt last year. The Recovery and Resilience Facility it created on Feb. 19 may continue to draw cash towards EUR.

China’s yuan offers the biggest long-term threat to dollar’s reserve status. China’s larger economy has outperformed rivals in the past year, resulting in a record current account surplus and a 6% yuan rise since August. The yuan has proved safe and, thanks to higher interest rates, those who buy yuan get paid to hold it.

If China allows yuan to move freely it could steal the dollar’s crown.

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(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

((jeremy.boulton@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.