More notes from Hong Kong: Ken Rogoff on the primacy of the US dollar

The world is gradually moving towards currency diversification.

Will the dollar lose its status? Which currency might challenge the dollar?

At the recent HSBC Global Summit in Hong Kong, Harvard professor and former International Monetary Fund (IMF) chief economist Kenneth Rogoff argued that while the dollar remains the primary global currency, its status as number one is beginning to look more fragile. The question is not so much whether the world will continue to use the dollar, but whether countries are becoming more determined to reduce their dependence on it.
 
For decades, the dollar has been both the world’s reserve currency and the backbone of global trade, debt and payments. Yet Rogoff suggested that what has historically underpinned that position was not simply economic strength, but trust: trust in US institutions, in the rule of law, and in America’s willingness to provide global stability.
 
That trust, he argued, is being tested.
 
Recent geopolitical tensions, from the Middle East to the prospect of a more fragmented global order, are accelerating a shift that was already underway. Rather than a sudden collapse in dollar dominance, the world is moving gradually towards diversification. Countries are increasingly uncomfortable with having “all their eggs in one basket”.
 
China is building alternatives to the dollar system through payment networks, swap lines and increased use of the renminbi in trade. Europe, meanwhile, is once again exploring how to give the euro a larger international role. Rogoff noted that the eurozone saga in the wake of the financial crisis was not inevitable; it was as much about political choices and events as economics.
 
The discussion also highlighted an important distinction: dollar dominance is not the same thing as dollar valuation.
 
Rogoff believes the dollar itself is overvalued, comparing today’s position to only two other periods in the post-war era: 1985 and 2002. On both occasions, the dollar eventually weakened materially. In his view, the current level of the dollar reflects not only economic strength, but the lack of sufficiently developed alternatives.
 
Perhaps the most striking point was that the greatest threat to the dollar may not come from abroad but from within.
 
The US fiscal position is a central concern. Rising debt, higher interest costs and a growing dependence on short-term borrowing leave the US more vulnerable to future shocks. Rogoff warned that interest payments are on track to become the single largest item in the US budget. That does not mean crisis is inevitable, but it does mean the margin for error is shrinking.
 
At the same time, technology may reshape the debate. Stablecoins could reinforce the dollar’s role in the digital economy, while cryptocurrencies and alternative payment systems offer countries and individuals new ways to move outside the traditional dollar-based framework.
 
The conclusion was clear: the dollar is not disappearing, but the era of unquestioned dominance may be ending. The future is likely to be more fragmented, more competitive and more multipolar. For investors, that means thinking less in terms of a single global anchor and more about a world where selectivity, diversification and resilience matter more than ever.