President Donald Trump on Tuesday said the US dollar will retain its status as the world's reserve currency despite its decline this year.
The US dollar, to which most Gulf currencies are pegged, has been the world's reserve currency for decades. Recent data from the International Monetary Fund showed that the share of US dollar holdings in foreign allocated reserves was at 57.80 per cent in the fourth quarter last year.
The portion of global payments involving the dollar also passed 50 per cent at the start of this year, according to Swift.
“If we lost the standard … that would be like losing a war, a major world war. We would not be the same country any longer. We're not going to let that happen,” Mr Trump told reporters during a cabinet meeting at the White House.
Mr Trump made the comments after being asked about a previous remark on social media in which he threatened to issue an additional 10 per cent tariff on any country that aligns itself “with the anti-American policies of Brics".
Brics is an intergovernmental organisation comprising emerging market countries that have experienced significant economic growth and play a major role in the world economy. It is named after its founding members – Brazil, Russia, India, China and South Africa.
Mr Trump, who maintained the “the US dollar is king”, said others can challenge the currency's status, “but they're going to have to pay a big price”.
“And I don't think any of them are willing to pay that price,” he said. Mr Trump also repeated his threat to issue additional tariffs on Brics countries.
The value of the US dollar has dropped more than 10 per cent this year, its worst sixth-month stretch at the beginning of the year in more than five decades.
The dollar's dip comes as Mr Trump has shaken investor confidence with his shifting trade policies, notably through tariffs. He this week began sending out so-called trade letters to countries informing them what the US will charge on imports if a deal is not struck by August 1.
Mr Trump has also frequently attacked Federal Reserve chairman Jerome Powell for not lowering interest rates, threatening the central bank's independence that underpins confidence in financial markets. On Tuesday he again called for Mr Powell's resignation. Mr Powell has maintained he will serve out the remainder of his term which expires next year.
And the passage of the One Big Beautiful Bill last week will add trillions of new dollars to the US debt, which has already grown to more than $36 trillion.
Foreign investors have responded by selling government bonds and US stocks.
One survey from the Bank of America showed that 23 per cent of fund managers now prefer American stocks, compared to 54 per cent for international stocks.
The US dollar index was trading 0.03 per cent higher on Tuesday.
