Washington politics may undermine the dollar’s global role. Central banks hold the bulk of their reserves in dollars. Now some economists and analysts think Washington’s political dysfunction and growing push for isolation may loosen the dollar’s central role in the global economy. But, they say, the state of U.S. politics could spook investors and central banks enough to pare their dollar-denominated holdings and seek shelter elsewhere. If the dollar’s status were to change, he says, “the most likely explanation would be a failure of domestic policy.”Even an incremental decline in the dollar’s global status could have ripple effects across the U.S. and abroad.

Source: Wall Street Journal September 25, 2017 02:07 UTC