Continued U.S. trade deficits coupled with foreigners' desire to diversify their currency holdings away from U.S. dollars
A)could further diminish the position of the dollar as the dominant reserve currency.
B)could affect the value of U.S. dollar (e.g. through the currency diversification decisions of Asian central banks).
C)could lend steam to the emergence of the euro as a credible reserve currency.
D)all of the above

Question

Quizplus · Accepted Answer

All of the given options are possible outcomes resulting from continued U.S. trade deficits and foreign diversification of currency holdings. These factors can lead to a weakened position of the U.S. dollar as the dominant reserve currency and can also affect the value of the dollar. Additionally, the euro may gain credibility as a reserve currency due to these shifts in global currency holdings.