While guesses about the duration of the dollar's status as a global reserve currency are staples of books and articles about the US economy and its high public debt, it appears that cross-border investors were as keen as ever on the greenback after the pandemic struck.      

The US has accounted for almost a third of the world’s cross-border investment since the onset of the pandemic, International Monetary Fund figures reportedly show.

They show that for all the talk about how the dollar’s status as a global reserve currency might be under pressure, suggestions of its demise are vastly over-stated.

IMF figures sent by Bloomberg showed that the share of global flows has risen because a shortage of dollars in the pandemic year of 2020 worried global investors. Actions by the US, the European Union, Switzerland and others to freeze Russian assets also raised questions about the free movement of capital. Before the pandemic, the US share of cross-border capital was 18 per cent, the IMF reportedly said.

One cause for holding dollars was the rise in US interest rates to curb inflation, giving holders higher yields relative to what they could hold elsewhere. Another reason, possibly, was the package of measures by the Biden administration to encourage chip production and renewable energy. 

The change is a marked contrast to stories about how China and other fast-growing emerging market countries were attracting a thicker slice of cross-border capital before Covid-19 hit markets and forced a re-think about global supply chains, among other factors.

China’s share of gross cross-border capital flows stood at 3 per cent over the 2021 to 2023 period, falling from around 7 per cent during the decade through 2019, according to IMF data, the report said.