The U.S. dollar is indisputably the world's reserve currency.
It comprises the majority (62%) of foreign exchange reserves held by central banks, with the euro a distant second, accounting for 24% of reserves.
And despite concerns that the Federal Reserve's quantitative easing programs are debasing the dollar, perhaps throwing its reserve status into question, BofA Merrill Lynch strategist John Shin argues that "there still has not been much diminishment in the U.S. dollar's role," which is "likely to remain unchanged for the time being, especially given the lack of external competitors that could supplant the dollar."
In a note, Shin explains the main reasons why the dollar works so well as the world's reserve currency, and why it's unlikely to cede its position:
The need for such an international currency depends on its usefulness as a reserve, a vehicle currency for intervention, and as an anchor for a currency peg, all of which the U.S. dollar clearly holds unique significant value.
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