Global trends: fear strikes policymakers as ‘dollar bloc’ begins to unravel

Over the past year, several countries confronted with the choice between currency depreciation and fiscal austerity concluded that a tight link to the dollar is no longer sustainable; more can be expected to follow in 2016-2017. (source: macpixxel for GIS)
Over the past year, several countries confronted with the choice between currency depreciation and fiscal austerity concluded that a tight link to the dollar is no longer sustainable; more can be expected to follow in 2016-2017. (source: macpixxel for GIS)

A clean break in the renminbi’s link to the dollar, which has existed since China started opening its economy in the late 1970s, would herald the demise of a “dollar bloc” that has dominated global finance for decades. While this would not necessarily displace the dollar as the world’s main reserve currency, it would significantly reduce the U.S. Federal Reserve’s role as a global monetary superpower.

<i>Below is the first report in GIS’s “Global Trends” series, which aims to forecast big-picture scenarios that will shape the world this year and beyond</i>

On December 11, 2015, the Chinese authorities unveiled a trade-weighted index to track the re...

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