Dollar Dominance Fading: Harvard Economist Warns of Financial Shock by 2028-2029

The era of unchecked US dollar supremacy may be ending sooner than most investors realize. Kenneth Rogoff, the Harvard economist and former chief economist of the International Monetary Fund, has issued a stark warning: expect significant financial turbulence within 4-5 years as the dollar's grip on global markets weakens.

Why the Dollar's Reign is Ending

In a recent interview with Nikkei, Rogoff outlined a scenario that challenges decades of financial orthodoxy. The US dollar, which has dominated international trade and reserve holdings since post-WWII bretton Woods agreements, is losing ground to the Chinese yuan and the euro. This isn't a gradual shift—Rogoff suggests we're approaching an inflection point where currency diversification accelerates dramatically.

For Korean investors and businesses, this carries profound implications. South Korea's economy is deeply integrated with global dollar-denominated transactions, from energy imports priced in dollars to foreign direct investment flows. A weaker dollar environment could alter import costs, export competitiveness, and the valuation of foreign assets held by Korean institutions.

What This Means for Markets

Rogoff's timeline—pointing to 2028-2029—suggests we're already in the danger zone. The warning isn't about a gradual, orderly transition. Instead, he anticipates a "financial shock," implying sudden repricing of assets, currency volatility, and potential disruption to credit markets. This echoes Rogoff's academic work on financial crises, where he's documented how systemic shifts often materialize abruptly rather than smoothly.

The yuan's internationalization accelerates as China expands Belt and Road initiatives and strengthens trading relationships across Asia. Simultaneously, the euro—despite European economic challenges—offers an alternative for central banks seeking portfolio diversification away from dollar concentration.

The Korean Context

For Korea specifically, a dollar decline could be a double-edged sword. While it might ease the burden of dollar-denominated debt repayment, it could also reduce foreign investment attractiveness if the won strengthens alongside dollar weakness. Korean exporters, already sensitive to currency fluctuations, would face new competitive dynamics in global markets.

This is precisely why Korean policymakers and institutional investors are monitoring reserve diversification trends closely. The Bank of Korea's foreign exchange management strategy may need recalibration in this new monetary environment.

Key Takeaway: Rogoff's warning isn't alarmism—it reflects structural shifts in global finance that are already underway. With 4-5 years potentially remaining before significant market disruption, investors should begin stress-testing portfolios for a world where the dollar shares power rather than dominates it. For Asian markets, including Korea, this transition could offer both opportunities and risks that demand strategic positioning now.

📌 Source: [Read Original (Korean)]