A Canadian economist and professor at the University of British Columbia says the role of the U.S. dollar in international trade and as a reserve currency has been declining. “Other currencies have been getting more important in international transactions and as reserve currencies,” he stressed.
Economist James Brander shared his thoughts on the worldwide de-dollarization trend and the waning influence of the U.S. dollar last week. While noting that the U.S. dollar is “the major reserve currency” and “over half of all international currency reserves in the world are U.S. dollar reserves,” he said: “The role of the U.S. dollar has been declining. It’s still big, but it has been declining.” The economist added: “Other currencies have been getting more important in international transactions and as reserve currencies. Current geopolitical tensions have increased the move towards using other currencies … especially Russia, as well as China, and some other countries.”
“More local currencies are being used for international transactions,” the professor reiterated. “So, we’ve got a transaction between India and Russia and that’s handled either in Indian currency or Russian currency. We’re seeing more of that instead of U.S. dollars. I don’t see a problem with that.”
The imposition of economic sanctions by the U.S., particularly on Russia, is widely viewed as a significant driving force for other nations to transition away from the USD. U.S. Treasury Secretary Janet Yellen stated last month: “There is a risk when we use financial sanctions that are linked to the role of the dollar that over time it could undermine the hegemony of the dollar … Of course, it does create a desire on the part of China, of Russia, of Iran to find an alternative.”
De-dollarization efforts have been gaining momentum among the BRICS nations (Brazil, Russia, India, China, and South Africa). The economic bloc is also working on creating a common currency that will help its members reduce their reliance on the U.S. dollar. The BRICS leaders are expected to discuss the matter at their upcoming leaders’ summit in August. In addition, 10 Southeast Asian nations recently agreed to encourage the use of national currencies in transactions.
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