Dateline: June 28 2029

It’s been several decades since the euro was launched at roughly one to the dollar. For years after that, the dollar seemed destined to trade at a lower value, despite being the world’s most popular currency for trade and investment.

The very fact that dollars were so abundant, and freely available in all corners of the world, helped to keep the currency weaker than its eurozone rival. It was no secret that the US could print money at will, effectively taxing the billions held offshore. And in this way, the euro made steady gains against it. Until the global financial crisis of 2008 upset the chessboard and reset the game.

Everything changed when interest rates evaporated and capital sought safe refuge, with the dollar consolidating its position as the global reserve currency. After 20 years, the euro briefly touched parity to the dollar in 2022, before bouncing back and settling into a range around $1.10.

But years of unexpectedly good performance by the US economy, coupled with conflict in Europe and the aftermath of regional shocks and political turmoil, have once again forced the euro below par. And this time it’s going to stay there. Spiralling debt and right-wing populism are making EU investors nervous.

As global wealth and power have shifted to the East, with the rise of China and India, so has the decline been felt on both sides of the Atlantic, but more so in the eurozone. EU’s green transition relies heavily on materiel from southern and eastern Asia, funnelling euro eastwards. Britain and North America seem to be more adaptable and resilient, and trans-Pacific trade has never been brisker.

But wait, there is a silver lining for Europe: US tourists will be arriving in droves this season — they’re getting so much more euro bang for their buck!

• First published on Mindbullets on December 21 2023

King dollar refuses to abdicate

Digital yuan fails to claim the crown

Dateline: August 8 2028

Despite the economic cold war that has been waged between the West and the rest for the past six years, and attempts to dethrone the almighty dollar as the global reserve currency, the dollar retains the dominant share of international payments.

When Russia invaded Ukraine, Western sanctions partially blocked its access to international payment system SWIFT, prompting Russia to elevate the rouble for global oil and gas sales. Energy-dependent countries had no option but to comply. Despite a massive initial drop in the value of the rouble, Russia weathered the storm as energy prices soared.

At the same time, China had been successfully operating its digital yuan in domestic markets, and had developed its own cross-border payment system known as CIPS. In support of Russia, China ramped up its cross-border tests of the digital yuan, signalling its long-desired ambition to challenge dollar hegemony in international settlements.

By making the digital yuan (e-CNY) more portable, or freely convertible into dollar stablecoins, China was able to greatly increase its share of international payments from the 3% recorded in the early 2020s. This was a far cry from the euro’s 36% share, and the dollar continued to widen the gap to beyond 45% in the wake of EU economic weakness, as the war dragged on, and Europe was forced to import American gas.

But China’s biggest obstacle was its own balance of payments surplus. With more than $3.5-trillion in foreign reserves — almost entirely held in dollars — China was symbiotically bound to the US financial system. China’s success relied on the dollar’s success, and vice versa.

Now, despite the currency cold war and the sovereign crypto adventures of e-CNY, the dollar remains the world’s reserve currency of choice, and the standard for international payments. No-one, not even China, has managed to dethrone the king.

• First published on Mindbullets 18 August 2022

• Despite appearances to the contrary, Futureworld cannot and does not predict the future. The Mindbullets scenarios are fictitious and designed purely to explore possible futures, and challenge and stimulate strategic thinking.