In this blog post, we delve into the insights shared by Ken Fisher, the founder and Executive Chairman of Fisher Investments, on what it could mean for the financial world as the U.S. dollar loses its stature as a reserve currency. As an accomplished investment strategist, Fisher’s perspectives on the matter are particularly valuable in helping us understand the implications of this shift for international trade, global markets, and more. So let’s explore what Fisher has to say on this topic and how it could impact your investments.
Fisher Investments’ Ken Fisher on What the Dollar Losing Its Place as a Reserve Currency Means
Introduction
The US dollar has been the primary currency used in global trade for decades, but there are concerns about its future as a reserve currency. Ken Fisher, the founder, and chairman of Fisher Investments, recently addressed these worries. Let’s explore his views on the matter.
The US Dollar and its Status as a Reserve Currency
The US dollar has been the dominant currency in global trade for decades and serves as the primary reserve currency held by central banks worldwide. Countries have used the US dollar for trade due to its stability. Even countries like China and Russia hold substantial US dollar reserves.
Ken Fisher states that although there may be concerns, the dollar losing its place as a reserve currency does not necessarily equate to a sudden decline in its value. Fisher Investments believes that the US dollar will always have a significant role in global trade due to its depth and liquidity and is still the safest currency to hold.
Decline in Global Trade Done in Dollars Since 2000 Has Been Modest
There has indeed been a decrease in the use of the US dollar in global trade since the 2000s. However, this decrease has been modest. Figures from the International Monetary Fund (IMF) reveal that in 2000, around 70% of global trade was done in US dollars, and by 2019, this percentage lowered to roughly 60%. Nevertheless, a lower percentage does not indicate a decline, and Fisher Investments views these figures more as a stabilization.
The Euro’s Stability Has Increased Trust in Other Major Currencies
The introduction of the Euro as a currency for the European Union in 2002 affected the dominance of the US dollar. The Euro’s stability increased trust in other major currencies, and they are now utilized in global trade alongside the US dollar. Additionally, the Japanese yen, British pound, Swiss franc, and Canadian dollar are also significant players in the global economy. These stable currencies gaining momentum shows a growing global economy and increased faith in currencies.
Media Reports Sparked Fear Regarding Saudi Arabia Pricing Oil Contracts in Chinese Yuan
Media reports of Saudi Arabia pricing oil contracts in Chinese Yuan sparked a brief fear in markets worldwide. It was viewed as an indication that the US dollar was losing its dominance as a reserve currency. However, Fisher Investments states that this shift of oil contracts was not a significant factor. Saudi Arabia pegs its currency to the US dollar and has shown no signs of shifting.
Global Trade in Stable Currencies Shows a Growing Global Economy and Increased Faith in Currencies
Global trade in stable currencies serves as a pivotal aspect of the world economy. Fisher Investments believes that there is evidence that global trade is not decreasing but rather increasing steadily. In the past, countries were restricted to utilizing the US dollar for international trade. Nowadays, more established currencies are used in trade, indicating a growing global economy and increased faith in those currencies.
Additional Risks to Look Out For When Investing in Foreign Stock Markets
Fisher Investments has general views that should not be taken as personalized investment advice. Investing in foreign stock markets involves additional risks such as currency fluctuations. When investing in foreign stocks, it’s vital to have a comprehensive understanding of currency risks when investing.
Conclusion
In conclusion, even though there are worries about the US dollar losing its status as the primary reserve currency in global trade, Fisher Investments believes it’s unreasonable to predict an immediate decline in its value. The decrease in global trade performed in US dollars is modest, and the growth of other stable currencies indicates a strong global economy. It’s vital for investors to be prepared for the additional risks when investing in foreign stock markets.
