“The IMF Threatens to Kill the U.S. Dollar” and other Fear Tactics

The dramatic title above echoes a trend of recent articles we’ve seen preying upon fears that the U.S. will lose its spot as the default global currency of choice. Recent announcements by the International Monetary Fund (IMF) have talked about potentially adding the Chinese yuan as an official reserve currency. The hot take from this has been to infer that it means the U.S. is getting knocked out of the top spot. However, many investors don’t realize that the IMF already considers the euro, yen and sterling as reserve currencies alongside the dollar. The inclusion of the Chinese yuan into the reserve assets of the IMF is more of an acknowledgement to the growing size of the world’s second largest economy (China) than any type of a knock against the dollar. It will not change the fact that the U.S. dollar is still the default for most international financial and commodity transactions.