via Yahoo:
“Every night I ask myself why all countries have to base their trade on the dollar,” the Brazilian President, Luiz Inacio Lula da Silva, said on a recent visit to China.
If this seems implausible – there are surely less arcane issues to dwell on as bedtime approaches – the observation nevertheless highlights growing concern in the developing world over continued dollar supremacy.
Despite the birth of the euro, and an increasingly assertive yuan, the dollar remains far and away the dominant currency for international trade and capital markets activity.
So much so that if, for instance, you buy goods from Rwanda, it is highly likely that your pounds would first be converted into dollars before conversion into Rwandan francs; there is little or no liquidity in pounds to francs, but there is plenty of it in pounds to dollars, and dollars to francs.
In any case, more than 70pc of global trade involved the US dollar last year, with even higher percentages ruling for settlement in global financial markets. These proportions have barely moved in more than three decades. Rumours of the dollar’s demise, in other words, are greatly exaggerated.
Trust is at the centre of this almost unassailable position. Credible alternatives simply don’t exist as things stand. If you believe the Chinese data, the yuan is making important inroads, and certainly there is no lack of ambition. Beijing is well aware of the economic advantages of a pre-eminent currency, and as on much else, is determined to claim the position as its own.