Janet Yellen on The Dollar

Janet Yellen, as Treasury Secretary, maintains a strong defense of the US Dollar's status as the world's primary reserve currency, emphasizing that no other currency currently possesses the necessary global infrastructure to displace it. She points to the US having deep, liquid, and open financial markets, a strong rule of law, and an absence of capital controls as reasons for the dollar's continued preeminence. While she acknowledges that the dollar's share of global reserves may gradually decrease as nations seek to diversify, she remains adamant that finding a meaningful workaround for most countries will not be easy, asserting the greenback will remain dominant for the foreseeable future.

This position is contextualized by her administration's use of financial sanctions, which she has admitted creates a desire among countries like China, Russia, and Iran to find alternatives. However, Yellen has argued that such tools are used judiciously and often with the support of allies, noting the difficulty other nations face in replicating the foundational elements supporting the dollar’s role. Historically, she is expected to steer the Treasury back toward traditional perspectives on currency policy, focusing on orderly and liquid markets rather than past administrations' focus on bilateral trade accounts or explicitly targeting exchange rates for competitive advantage.