The dollar is not merely a store of value. It has also become a popular “funding” currency. Banks and multinational firms borrow in dollars, even as they accumulate assets in other denominations. Since no one wants to borrow in a currency that only goes up, this is not a role that China’s currency could easily play. Moreover, because of its role as a funding currency, the dollar tends to strengthen in times of crisis. That explainTs why emerging economies feel a “lumpy”, “unpredictable” need for dollars. America’s currency may not hold its value against others. But in times of stress, the appeal of a dollar asset is that it always holds its value against a dollar debt. The dollar is a global hegemon partly because it is also a global hedge.  Hegemon and Hedge