Global debt markets show dollar dominance moves in cycles, US Fed says

A new Federal Reserve discussion paper, utilizing BIS data, concludes that the US dollar's dominance in global bond markets has followed cyclical patterns over the last six decades, rather than exhibiting a steady trend toward either greater dollarization or de-dollarization. The study identified three distinct "dollarization waves" since the 1960s, with the most recent surge occurring after the 2008 financial crisis. As of 2024, emerging market issuers still heavily rely on dollar-denominated debt (about 80% of their international bonds), and China's efforts to internationalize the renminbi have yielded only modest results. The paper suggests that while the dollar's eminence has vulnerable foundations, the lack of viable alternatives keeps its primacy unchallenged. Furthermore, the rapid growth of dollar-pegged stablecoins, like Tether's USDT and Circle's USDC, has made their issuers significant holders of short-term US government debt, potentially reinforcing the dollar's global role, a development that has drawn concern from European officials regarding the euro's standing.

(Source：Cointelegraph)