The Greek crisis has reassured the greenback that credible alternatives to its stature as the international reserve currency are yet to develop. Suddenly, no one is talking about the reasons why the dollar should not be the leading international reserve currency. Within a decade or so, the ambitious euro, which has been hailed as “the” alternative to the dollar, had to meet its first major challenge. The euro is still to come to terms with common monetary and different fiscal policies as the euro zone can neither jettison Greece nor can it comfortably retain it in its lap. No doubt, it’s a remarkable feat that the countries have come together and put up a common currency, but then the question is whether it can survive with asymmetric fiscal policies.
While that is a different question altogether, foreign exchange reserve managers the world over, especially those who have been betting on the euro more than it deserves, must be having serious deliberations with regard to their next strategy.
R Gurumurthy, Tokyo
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