Opinion DAVID MALIŠ, Head of the National Bank of Serbia’s Reserves Management Division
Our Currency, Your Problem At a juncture when the attention of everyone is directed towards the moves of the monetary authorities of the U.S. and EU, we are perhaps missing out on focusing on another question: do current developments herald the future rise of Asia and the creation of some new safe havens, at least economywise?
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here’s no topic that’s being debated around the world of international finance more than that of the future of the dollar as the world’s reserve currency, and there’s no less debatable fact than that everyone wishes they had that same dollar whenever a crisis hits. And the current and previous year were no exceptions when it comes to confirmation of this fact. The dollar appreciated more than it has in the last 40 years,
22
January
even outdoing the strengthening it experienced during the period of the COVID pandemic, when a shortage of dollars on the global market led to the so-called “liquidity squeeze”. Over the long term, the real exchange rate of the dollar appreciated by over 40% in the 2011-2022 period, marking the second largest increase in the post-Bretton Woods era. At the end of September 2022, the EUR/USD exchange rate had fallen to below 0.96, the lowest rate
of the last 20 years. The key cause of the dollar’s strengthening against the euro can be attributed to the rise in yields in the U.S., which came as a result of the accelerated policy tightening of the Federal Reserve.The war in Ukraine, and the subsequent problems of European economies, additionally contributed to the U.S. dollar’s safe haven status. But why is this strengthening of the dollar, as a result of the aforementioned reasons, even