In a mid-year review of the world economy, the UN economic division said such a development, stemming from the falling value of foreign dollar holdings, would imperil the global financial system.
The report, an update of the UN “World Economic Situation and Prospects 2011” report first issued in December, noted that the dollar exchange rate against a basket of other key currencies had reached its lowest level since the 1970s.
“As a result, further (expected) losses of the book value of the vast foreign reserve holdings could trigger a crisis of confidence in the reserve currency, which would put the entire global financial system at risk,” it said.
The 17-page report referred at another point to the “still looming risk of a collapse of the United States dollar.” Rob Vos, a senior UN economist involved with the report, said if emerging markets “massively start selling off dollars, then you can have this risk of a slide in the dollar.
UN economists have for some time queried whether the dollar should continue to be the world’s sole reserve currency. Others have also expressed concerns about U.S. finances.
A downgrade would erode the status of the United States as the world’s most powerful economy and the dollar’s role as the dominant global currency.