The mighty US dollar continues to reign supreme in global markets. But the greenback\u2019s dominance may well be more fragile than it appears, because expected future changes in China\u2019s exchange-rate regime are likely to trigger a significant shift in the international monetary order.<\/p>\n
For many reasons, the Chinese authorities will probably someday stop pegging the renminbi to a basket of currencies, and shift to a modern inflation-targeting regime under which they allow the exchange rate to fluctuate much more freely, especially against the dollar. When that happens, expect most of Asia to follow China. In due time, the dollar, currently the anchor currency for roughly two-thirds of world GDP<\/a>, could lose nearly half its weight.