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The dollar has been the world’s reserve currency since World War II, but a combination of political and economic reasons is slowly chipping away at its supremacy.
Nearly 60 percent of international reserves are held in dollar-denominated assets, according to the International Monetary Fund. The dollar is also the most widely used currency for trade.
Now, Western-led sanctions against Russia related to its invasion of Ukraine are making other countries wary of potential consequences of crossing Washington.
Some, such as Brazil, Argentina, Bangladesh, and India, are lining up backup currencies and assets — such as the Chinese yuan and bitcoin — for trade and payments.
While the macro-geopolitical environment is spurring countries to seek alternative currencies, there’s long been uneasiness over the dollar’s outsized dominance in global trade and finance.
This de-dollarization talk has come back in waves every few years since at least the 1970s. Here are three other reasons countries around the world are attempting to line up plans to possibly move away from a dollar-dominated world.
- US monetary policy holds too much sway over the rest of the world. The US is the issuer of the world’s reserve currency, which is also the dominant currency in international trade and payments systems.
Consequently, it has an outsized hold on the world economy and is often overvalued, the Wilson Center think tank reported in May.
- The strong US dollar is getting too expensive for emerging nations. The greenback gaining strength against most currencies around the world is making imports far more expensive for emerging nations.
- Global trade and oil demand is diversifying — putting the petrodollar at risk.
It’s not just oil, either. — Business Insider Africa.
Online Reporter