Demand for dollars depends on dollar interest rates: There is a limit to reserve currency privilege

The sharp decline in dollar long-term interest rates in the recent period has caused the dollar to depreciate against the euro, the yen and the Chinese renminbi, and driven up the price of gold. This reveals that demand for dollars depends heavily on dollar interest rates, which shows the limit to the dollar’s reserve currency status: although the dollar is the dominant reserve currency, demand for dollars falls when dollar long-term interest rates decline.