But the greenback was still used for at least half of international trade invoices - five times more than the United States' share of world goods imports - exposing many countries to damaging spillovers from swings in the US economy.

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Carney - who was considered a candidate to be the next head of the International Monetary Fund but failed to secure backing from Europe's governments - said the problems in financial system were encouraging protectionist and populist policies.

Also on Friday, US President Donald Trump said he was ordering US companies to look at ways to close their operations in China, the latest twist in mounting trade tensions between Washington and Beijing. He also raised import tariffs on Chinese goods.

Carney warned that very low equilibrium interest rates had in the past coincided with wars, financial crises and abrupt changes in the banking system.

China's yuan represented the most likely candidate to become a reserve currency to match the dollar, but it still had a long way to go before it was ready, Carney said.

The best solution to dislodge US currency would be a diversified multi-polar financial system, something that could be provided by technology, Carney said.

Facebook's Libra was the most high-profile proposed digital currency to date but it faced a host of fundamental issues that it had yet to address.

"As a consequence, it is an open question whether such a new Synthetic Hegemonic Currency (SHC) would be best provided by the public sector, perhaps through a network of central bank digital currencies," Carney said.

Such a system could dampen the "domineering influence" of the US dollar on global trade.

"Even a passing acquaintance with monetary history suggests that this centre won't hold," Carney said.

"We need to recognise the short, medium and long-term challenges this system creates for the institutional frameworks and conduct of monetary policy across the world."

Reuters