US Dollar Losing Global Influence as Trade Grows in China and Sanctions on Russia, Says Billionaire Ray Dalio

The U.S. dollar’s role in the global economy is diminishing as America’s share shrinks and China’s role in international trade expands, according to billionaire investor Ray Dalio. In addition, Western sanctions on Russia have highlighted the risks associated with holding dollar assets.

Central Banks Show Less Interest in Dollar as Currency of Choice

Fewer nations are choosing to use the U.S. dollar in their international trading activities as its influence fades, billionaire investor Ray Dalio noted during a recent interview on Youtube. He also pointed out that sanctions imposed on Russia over its invasion of Ukraine have revealed new dangers associated with possessing dollar assets.

In an interview on the Julia La Roche Show last week, the founder of Bridgewater Associates remarked that central banks are increasingly reluctant to hold the greenback. “When a central bank holds a dollar, it is actually holding a debt asset,” he said, according to excerpts quoted by the Business Insider on Tuesday.

Previously, nations have been willing to accept the risk of holding the U.S. dollar as it was widely used in international transactions. However, with China pushing for the yuan’s more frequent use in trade deals with countries like Brazil, Kazakhstan and others, the need for the dollar may decrease in the future.

At the same time, sanctions imposed by Western countries on Moscow have been driving the Russian economy towards the yuan, while Russia also saw $330 billion in currency reserves frozen, further preventing it from transacting in dollars or euros. Ray Dalio believes that these restrictions have heightened the perceived danger of having dollar assets. He concluded:

Therefore, there is a decreasing desire to maintain U.S. dollar-denominated debt, and this means that the supply-demand picture is worsening, especially as we keep having to sell them internationally to fund the deficit.

In a Youtube interview with Tom Bilyeu posted on Saturday, Ray Dalio once again highlighted the weaponization of the U.S. dollar as a factor for its diminishing role. “The United States’ greatest weapon to use, as distinct from military weapon, is sanctions. This means freezing assets, which are bonds. This happened with Russia and there are threats of it with other countries, including China,” he explained.

In recent months, a few public figures have commented on how sanctions are likely to harm the dollar’s hegemony, from Fox News host Tucker Carlson to U.S. Treasury Secretary Janet Yellen. Within the next decade, the U.S. currency will play a much less important role than it does today, partly because of its weaponization, renowned economist Jeffrey Sachs was quoted as saying earlier this April. These statements come amid “de-dollarization” initiatives driven by BRICS, of which Russia and China are members.

What are your expectations about the future of the U.S. dollar’s role in global trade and economic relations? Share them in the comments section below.

Lubomir Tassev

Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’s quote: “Being a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.