Renowned economist Jim O’Neill said Tuesday that investors “have to believe” the dollar is not going to be the kingpin currency forever.
The greenback’s status as the world’s most powerful currency has been questioned for decades, but contracts based on the U.S. dollar continue to dominate global markets. However, in recent months, speculation has intensified that China could be poised to make a major move against the dollar’s dominance.
When asked to what extent he felt the dollar’s influence could be dwindling, the former chairman of Goldman Sachs Asset Management told an audience at the Abu Dhabi International Petroleum Exhibition Conference (ADIPEC): “I hold two contradictory views on this. Firstly, it’s never going to happen because the dollar is the dollar.
“However… Germany has recently become China’s number one trade partner and it is when you start to see things like this that you have to believe the dollar is not going to be kingpin in the future like it is today.”
China is the world’s top oil importer, and so Beijing sees it as only logical that its own currency should price the global economy’s most important commodity. But beyond that, moving away from the dollar is a strategic priority for countries like China and Russia. Both aim to ultimately reduce their dependency on the greenback, limiting their exposure to U.S. currency risk and the politics of American sanctions regimes.
The plan is to price oil in yuan using a gold-backed futures contract in Shanghai, but the road will be long and arduous.
“I don’t think you can say with confidence that over the next decade the dollar is finished, but the ongoing geopolitical developments suggest that could change in the future,” he said.