Will the Dollar be Dethroned as the Main Reserve Currency?

Abstract

The U.S. dollar was in the line of fire as leaders from the largest developed and developing countries participated in the G8 meeting in July, 2009. China and other emerging market heavyweights such as Russia and Brazil are pushing for debate on an eventual shift away from the dollar to a new global reserve currency. These countries are particularly concerned about the heavy debt burden of the United States and fear inflation will further debase the dollar which has lost 33 percent in value against other major currencies since 2002. Will the dollar continue as the main reserve currency of the world? What are the other currencies to watch as challengers to the throne? This paper addresses these questions.