Strategists: Dollar is still King - For now

The US dollar remains as the global reserve currency, for now. That is what analysts and strategists said during the ongoing Reuters Investment Outlook Summit. However the greenback will continue facing tremendous pressure as more emerging countries and influential political figures insist replacing the greenback as reserve currency.

In the recent BRIC (Brazil, Russia, India and China) summit, Russian president Dmitry Medvedev questioned the dollar’s reserve status causing the USD to fall on Tuesday. "No currency system can be successful if we have financial instruments denominated in just one currency," said Medvedev. He also added that the creation of new reserve currencies in addition to the dollar is needed to stabilize global finances. Yet the BRIC summit ended without completely addressing the dollar’s reserve status.

With so many talks regarding the reserve status of the dollar, no other currency appears ready to fill in the dollar’s shoes. "Diversification is happening very slowly, but it is important to recognize that the dollar has that position as a reserve currency because so much trade in the world takes place in the form of dollars," said Abby Joseph Cohen, senior investment strategist at Goldman Sachs said during the Reuters Summit.

Presently, the greenback is the most widely-held reserve currency in the world. As much as 70 percent of the world’s currency reserves are held in dollars. But with the economic crisis in tow, the dollar has fallen sharply against other major currencies. Nations such as Russia and China are calling for diversification to avoid excessive exposure to the U.S. economy while it counters the worst recession since the Great Depression.

Perhaps, all this talk about the USD’s vulnerability can be summarized to what Barclays Capital foreign exchange strategist Steven Englander said during the Reuters Summit: "What you are seeing is dissatisfaction with the dollar as the world's reserve currency."

And no matter how dissatisfied people are with the dollar, it is still the global reserve currency. Until the IMF (International Monetary Fund) will take that “revolutionary” step to replace the buck.  

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