De-dollarization a growing trend as anti-greenback drive intensifies

De-dollarization has become a buzzword in recent weeks as economists, international media outlets and business leaders have taken note of the slump of the greenback's share in trade and foreign reserves, a development that's particularly marked at a time when Washington's weaponization of the currency has alienated many of its users.

Many agree the trend of de-dollarization has taken hold because the U.S. sanctions regime, especially the deluge of sanctions it imposed on Russia since the Ukraine conflict, has driven the countries affected to push for alternatives to the dollar. Meanwhile, a growing number of countries, including U.S. allies, have been calling for a check on the dollar hegemony. 

"Every night I ask myself why all countries have to base their trade on the dollar," Brazilian President Luiz Inacio Lula da Silva said in an impassioned speech during his visit to China earlier this month.

"Why can't we do trade based on our own currencies?" he added. "Who was it that decided that the dollar was the currency after the disappearance of the gold standard?"

Reflecting concerns shared by countries from Southeast Asia to Europe, Lula's comments followed French President Emmanuel Macron's sweeping rebuff to Europe's dependence on the U.S. dollar.

"The extraterritoriality of the U.S. dollar" needs to be resisted, Macron said when he made a visit to China.

The growing calls for de-dollarization have come against the backdrop of a markedly sharp decline of the dollar's market share.

"De-dollarization is real and is happening fast," economist Peter St Onge said in a video posted on Twitter.

"Dollar share went from 73 percent (2001) to 55 percent in (2020). Went from 55 percent to 47 percent since sanction launched on Russia, now de-dollarizing at 10x faster than the previous two decades," Onge said.

"The dollar suffered a stunning collapse in 2022 in its market share as a reserve currency, presumably due to its muscular use of sanctions," Stephen Jen, CEO of Eurizon SLJ Capital Ltd., and his colleague Joana Freire wrote in a note. "Exceptional actions taken by the U.S. and its allies against Russia have startled large reserve-holding countries,"  

While the dollar's dominance won't be challenged in the short term, developing countries' inability to divest from the currency "is not preordained," and there's a possible future where countries other than the U.S. will actively shun from using the dollar, Jen and Freire wrote.

(Cover: U.S. dollar banknotes. /CFP)

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