The Dollar’s dominance tested: Professor Hélène Rey on the future of global currencies - Base page template
Is the dollar’s reign ending? Hélène Rey weighs in
In the latest episode of Think Ahead, the London Business School podcast hosted by Professor Sergei Guriev, Dean of LBS, the conversation turned to a subject that underpins global markets yet often goes unexamined: the power of the US dollar. Joining him was Professor Hélène Rey, Lord Bagri Chair in Economics at London Business School and one of the world’s leading experts on international finance and monetary systems.
Rey, whose pioneering research defined the “global financial cycle” and reframed the economic “trilemma” as a “dilemma,” has long examined how the dollar acts as the anchor of the international monetary system. As she told Guriev, the dollar’s dominance, unchallenged since the end of Bretton Woods, has proven remarkably resilient. “Despite moving away from gold in 1973,” she noted, “the dollar retained and even expanded its central role as a global medium of exchange, store of value, and unit of account.”
But 2025, Rey warned, may mark a turning point. Following the so-called “Liberation Day” in April, the familiar pattern of investors rushing to safety in times of stress has broken down. “This year we observed something unprecedented,” she said. “Uncertainty spiked, but investors moved out of the dollar and U.S. bonds. That suggests the equilibrium we’ve relied on for decades may be eroding.”
Rey drew a historical parallel to economist Charles Kindleberger’s description of the unstable interwar years, when Britain’s pound had lost its global dominance, and the dollar had not yet taken over. “We may be entering a new ‘Kindleberger gap,’” she said. “The US’s ‘exorbitant privilege’, its ability to borrow cheaply from the rest of the world, is now close to zero.”
Could the euro, the yuan, or even digital currencies fill the void? Rey was cautious. “The euro area has the scale but lacks a truly unified financial system and a joint safe asset,” she explained. “China remains constrained by capital controls, and cryptocurrencies don’t yet meet the basic criteria for money.”
Still, technological innovation, from central bank digital currencies to stablecoins, could reshape global finance. For now, however, Rey sees them reinforcing rather than replacing the dollar’s reach.
Her message to business leaders: stay vigilant. “We’re moving into a more multipolar and volatile monetary world,” she concluded. “Managing currency exposure and financial resilience is more critical than ever.”
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