IN 1944, the Bretton Woods Agreement created an international currency regime among 44 countries to facilitate international trade and cooperation.
The agreement pegged the US dollar to gold and the value of other currencies to the dollar.
Since then, the dollar has figured prominently as a reserve currency of many countries. Close to 60 per cent of global foreign exchange reserves are held in dollars.
These reserves are to meet foreign liabilities and support a nation's currency should it depreciate excessively against the dollar.
Now other countries are jockeying for the dollar's envious position.
These include the euro, Japanese yen and Chinese yuan.
Partly precipitated by the weaponisation of the dollar by the US through such means as freezing dollar-denominated assets of rogue countries, BRICS — the grouping comprises Brazil, Russia, India, China and South Africa — agreed last year to create a new international reserve currency.
Into this crowded race join 18 other countries, including Malaysia. They have agreed to denominate their trade with India in Indian rupees.
Asean too has jumped on the de-dollarisation bandwagon by shifting to local currencies. To top it off, there is the growing adoption of digital currencies such as Bitcoin.
Other moves militate against the dollar's premier position as a reserve currency. More countries are diversifying their reserves to reduce their reliance on the dollar.
Russia, Germany, France and Britain are using their own currencies to serve as reserve currencies.
Further, the International Monetary Fund announced last year that it would no longer use the dollar as its benchmark for evaluating a country's economic conditions.
The prediction of the dollar's decline in value and as a reserve currency is also based on an expectation that the US economy is in permanent decline.
Further, the dollar is expected to lose its lure once inflation is reigned in and the interest rate falls.
The dollar's lustre would also dull when the euro-zone economy recovers handsomely. This should be possible with the envisaged Chinese economic expansion.
Such an expansion should elevate the economic performance of emerging economies on which the euro zone recovery largely relies.
Notwithstanding, we contend that the dollar will not fade away for the following three reasons.
FIRST, the interest rate is still rising in the US, the latest being a 25 basis-point rise.
The five per cent interest rate is higher than in Japan and the euro zone.
The American economy continues to stay resilient while Japan and the Euro zone remain weak. That dynamism springs from the ease of starting a business as is restructuring it through bankruptcy.
It also springs from a flexible labour market that helps employment adapt to changing demand.
SECOND, the dollar is buttressed by a fundamentally strong and stable economy.
Although its politics is toxic, America remains the world's richest economy.
Accounting for a quarter of the world's output and nearly 60 per cent of that of the G7 group of countries, the US economy is one of the largest in the world.
Average incomes have risen faster than in Western Europe or Japan.
Even incomes per person in the US' poorer states are higher than, for example, in France.
THIRD, the US is the most productive and innovative economy, beating the Europeans and the Japanese. The US spends 3.5 per cent of its GDP on research and development (R&D).
Such productivity-enhancing R&D adds to the country's economic heft.
It results in the US having more than a fifth of patents registered abroad, outdoing the combined patents belonging to China and Germany.
The five biggest R&D organisations in the world are American. Their innovations have benefited the world, from nano transistors on microchips to artificial intelligence.
As with the witches' deceptive prophecies that Macbeth will be king of Scotland in Shakespeare's eponymous play, appearances can be misleading.
Similarly, it is unlikely that the dollar will wane in significance in the foreseeable future.
The writer is the AIMST University vice-chancellor