If we turn around and nix the deal and then tell them, ‘You’re going to have to obey our rules and sanctions anyway,’ that is a recipe, very quickly … for the American dollar to cease to be the reserve currency of the world,”
If the United States walks away from the nuclear deal with Iran and demands that its allies comply with U.S. sanctions, a loss of confidence in U.S. leadership could threaten the dollar’s position as the world’s reserve currency, the top U.S. diplomat said on Tuesday.
“If we turn around and nix the deal and then tell them, ‘You’re going to have to obey our rules and sanctions anyway,’ that is a recipe, very quickly … for the American dollar to cease to be the reserve currency of the world,” U.S. Secretary of State John Kerry said at a Reuters Newsmaker event.
Defending the July 14 Vienna agreement between Iran and world powers that he helped to negotiate, Kerry deployed a new argument in a feverish battle to prevent lawmakers from killing it. Congress has until Sept. 17 to act.
Kerry warned of a potential loss of U.S. financial and political clout. He said this was not something that would happen overnight but many countries were “chafing” under the present international financial arrangements.
He said U.S. Treasury experts “are doing a full dive on how this works and what the implications are. But the notion that we can just sort of diss the deal and unilaterally walk away as Congress wants to do will have a profound negative impact on people’s sense of American leadership and reliability.”
New York-based Boris Schlossberg, managing director of FX Strategy, BK Asset Management, challenged Kerry’s reasoning. He said the dollar’s status could be compromised only if the United States was unable to compete economically on a global scale.
“The reality of the situation is that the U.S. dollar hasn’t been this strong in decades. The thought that it could be replaced as a reserve currency is laughable at this point on a geopolitical basis and nothing in the Iran deal even remotely touches upon that issue,” he added.