US Dollar's Dominance May Fade Slowly

Economist Barry Eichengreen's new book 'Money Beyond Borders' explores the history of international currencies, from Ancient Greece's silver coins to the modern US dollar. According to Eichengreen, one currency dominating in international transactions is a common phenomenon throughout history.

The Athenian 'owls', used by Athens as a commercial hub and leader of the Delian League of Greek city-states, set the standard for confidence-building design and gold content that remained unchanged for centuries. The Roman denarius and Byzantine gold solidus also played significant roles in international trade during their time.

The emergence of the US dollar as the global currency is attributed to the establishment of the US central bank in 1913, the country's economic growth, and the weakening of the UK after World War I. The Bretton Woods agreement in 1944 solidified the US dollar's position by pegging other currencies to it.

The US dollar remains dominant today, with around 90% of foreign exchange transactions involving it, and its use for invoicing about 40% of global trade. However, Eichengreen notes that this status is not forever and historically, dominant currencies have maintained their position for a long time after the issuing country's decline.

Eichengreen also argues that no other currency, including the euro or Chinese renminbi, is positioned to replace the US dollar in the near future. He suggests that the dollar may remain 'the cleanest dirty shirt in the pile' for some time to come.