Great news for the single European currency! Many experts believe that the euro may soon dethrone the dollar and take its place as the world’s leading currency. Curiously, not so long ago, people said that the euro was not fit for this role. Nevertheless, recent comments have fueled speculation about the euro’s ability to become the world’s reserve currency. This optimism is driven by growing hopes for the euro and sour sentiment towards the US dollar.

However, according to analysts at Macquarie, even though the euro is the strongest candidate for this role, the US dollar remains irreplaceable. For full dominance in the global market, the euro still needs to meet several preconditions. At present, the euro, along with the greenback and yen, fulfills the requirement of convertibility without capital controls.

Yet the single currency falls short in other key areas. “The issuer of a global currency must run a current account deficit to supply sufficient funds to foreign holders. The US dollar meets this requirement, but the euro, yen, and yuan do not,” Macquarie notes.

Moreover, analysts argue that a global currency needs a “deep and liquid pool of assets.” The greenback again meets this criterion, while the euro, yen, and other currencies do not.

As for payment systems, the euro also lags behind. According to Macquarie experts, the SWIFT and CHIPS systems set the stage for the dollar’s hegemony, “and no one comes even close to this level.”

Currently, the United States stands out in terms of “stronger growth and liquidity indicators compared to other countries.” In the experts’ view, the US economy remains the only major economy “capable of expanding labor and capital while achieving multifactor productivity growth.”

Despite the euro’s shortcomings and failure to meet all the preconditions, Macquarie acknowledges its growing importance. However, the euro still cannot overcome a major obstacle: the dollar currently accounts for 58% of global forex reserves, while the euro holds only 20%. Besides, nearly 50% of SWIFT transactions are conducted in dollars, while the euro ranks second with 22%. Summing up, Macquarie concludes that there is no alternative to the dollar in the foreseeable future.