As concerns spread that the dollar could be weaponized by the Trump administration, a world-renowned economist has forecast that "the Chinese yuan could achieve reserve currency status within five years." In the Middle East, reports of a potential additional U.S. ground troop deployment are deepening geopolitical uncertainty.
"Remaining Hostages of a Capricious America"
Kenneth Rogoff, a Harvard University professor and former chief economist of the International Monetary Fund (IMF), signaled a fundamental shift in the reserve currency system in an interview with Hong Kong-based South China Morning Post (SCMP) on Friday. His remarks came amid growing concerns that the dollar, the world's reserve currency, could be used as a weapon by the Donald Trump administration.
"Having one (reserve) currency is efficient, but in this case everyone will remain hostages of a capricious America," Rogoff said. "China and Europe have tolerated this for a long time, but now they will move faster to liberate themselves." His assessment is that both China and Europe will have no choice but to accelerate so-called "currency liberation."
He also laid out a specific picture of the gradual collapse of the dollar-centric system. "The result will be a more multipolar system where the dollar is no longer dominant," he said. "(Using credit cards as an analogy) it will be like having three or four cards instead of one. The dollar will still be on top, but it will be king of a smaller hill."
"Yuan as Reserve Currency Could Become Reality Within Five Years"
Developments within China are lending weight to Rogoff's forecast.
A past speech by Chinese President Xi Jinping outlining financial superpower goals — including reserve currency status for the yuan — drew attention after it was published through the Chinese Communist Party's theoretical journal Qiushi in February.
Rogoff called this "an extremely important moment," noting that "(achieving reserve currency status for the yuan) involves many steps, but it does not require a fully open capital market." In other words, China does not necessarily need to fully liberalize its capital markets for the yuan to achieve reserve currency status.
He went further, analyzing that "if the yuan moves toward becoming a reserve currency and a significant portion of Chinese government bonds are held by foreign investors, there will be considerable foreign preference to accommodate President Xi's voice on the reserve currency."
"This will happen within the next five years," he stressed. "Investors very much want to diversify away from the dollar." His judgment is that fatigue over dollar concentration has already built up considerably among global investors.
Middle East Deployment Reports Raise Fears of Prolonged Conflict
Meanwhile, a Wall Street Journal (WSJ) report over the weekend that U.S. President Donald Trump is reviewing a plan to deploy an additional 10,000 ground troops to the Middle East has raised the possibility of a prolonged war between the U.S.-Israel alliance and Iran.
However, Trump highlighted progress in negotiations in an interview with British daily the Financial Times (FT) on the 29th, among other outlets.
"We have about 3,000 targets remaining. We have bombed 13,000 targets and there are still thousands more remaining," he said, adding that "a deal could be reached quite quickly." He also claimed that "regime change has already taken place," noting that Iran's Supreme Leader Ayatollah Ali Khamenei and numerous senior officials were killed in strikes at the start of the war and subsequently.
In an interview with Israel's Channel 14, Trump signaled that the United States has already secured control over the Strait of Hormuz. He referred to the strait as the "Trump Strait," asserting that securing control "is already happening."
