Jan 17, 2019

The world's slow drift from the dollar

Illustration: Sarah Grillo/Axios

As the longest U.S. government shutdown on record drags into its 27th day, questions are again rising about the dollar's status as the world's reserve funding currency.

The big picture: Bank of England governor Mark Carney said recently that "ultimately we will have reserve currencies other than the U.S. dollar." This isn't a new idea. China’s central bank in 2009 called for a global move away from the dollar after the market turbulence caused by the U.S.-induced global financial crisis.

What they're saying: "There's a disconnect there, increasingly so, as the U.S. is less dominant in terms of the total economic pie in the world," John Hardy, head of FX strategy at Saxo Bank in Copenhagen, told me in June.

  • Carney further addressed the disconnect last week during a Q&A session, noting “the evolution of the global financial system is currently lagging behind that of the global economy."

Movement away from the dollar also has been taking place organically over the last few years. The most recent IMF data shows the dollar's share of currency reserves is at the lowest level in nearly 5 years, and has fallen for 8 of the last 10 quarters — though the dollar still accounts for more than 60% of global reserves.

  • Given the glacial pace of countries adopting new currencies, analysts agree it will likely be a while before the greenback loses its golden status.

Between the lines: However, the dollar's recent strength and President Trump's unpredictable and often market-moving antics have driven the issue back to the forefront. It's been 75 years since the Bretton Woods Agreement that made the dollar the world's funding currency, and drastic action could make moving away from the greenback a priority for some of the world's central bankers.

More Carney: "For example, emerging-market economies' share of global activity is now 60%, but their share of global financial assets lags behind at around one-third.”

  • Half of international trade was meanwhile invoiced in U.S. dollars, even though the U.S. share of international trade was only some 10%, Carney added.

Go deeper: The U.S. dollar's wild ride

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Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 5 p.m. ET: 659,367 — Total deaths: 30,475 — Total recoveries: 139,304.
  2. U.S.: Leads the world in cases. Total confirmed cases as of 5 p.m. ET: 121,117 — Total deaths: 2,010 — Total recoveries: 961.
  3. Federal government latest: President Trump is considering a quarantine on New York, parts of New Jersey and Connecticut.
  4. State updates: Alaska is latest state to issue a stay-at-home order — New York is trying to nearly triple its hospital capacity in less than a month and has moved its presidential primary to June 23. Some Midwestern swing voters that supported Trump's handling of the virus less than two weeks ago are now balking at his call for the U.S. to be "opened up" by Easter.
  5. World updates: In Spain, over 1,400 people were confirmed dead between Thursday to Saturday.
  6. 🚀 Space updates: OneWeb filed for bankruptcy amid the novel coronavirus pandemic.
  7. Hollywood: Tom Hanks and Rita Wilson have returned to U.S. after being treated for coronavirus.
  8. What should I do? Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk
  9. Other resources: CDC on how to avoid the virus, what to do if you get it.

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U.S. coronavirus deaths top 2,000

Nurses in masks, goggles, gloves, and protective gowns at Penn State Health St. Joseph conduct drive-thru coronavirus testing in Bern Township, Pennsylvania on March 27. Photo: Ben Hasty/MediaNews Group/Reading Eagle via Getty Images

More than 2,000 people have died from the novel coronavirus in the U.S. as of Saturday, per data from the Center for Systems Science and Engineering at Johns Hopkins University.

Why it matters: Recorded deaths in the U.S. surpassed 1,000 two days ago. The U.S. has the most COVID-19 cases in the world, exceeding China and Italy.

Go deeper: Trump weighs quarantine of New York, New Jersey, Connecticut

Infant dies after testing positive for coronavirus in Chicago

Hospital staff working inside a COVID-19 screening tent in Chicago on March 26. Photo: Jim Vondruska/NurPhoto via Getty Images

An infant less than one year old died in Chicago, Illinois after testing positive for the novel coronavirus, the state health department said on Saturday.

Why it matters: The death would mark the first reported infant mortality from COVID-19 in the U.S. The fatality rate for the novel coronavirus in the U.S. is highest among those over 85 years old, per the CDC.

Go deeperArrow3 hours ago - Health