An analog alarm clock sits on top of a spread of one dollar bills. Photo: CGTN.
Last week, US Secretary of the Treasury Janet Yellen acknowledged that US sanctions against Russia and other countries are endangering the hegemony of the dollar as those sanctioned try to find alternatives.
Even French President Emmanuel Macron commented that Europe should reduce its reliance on the “extraterritoriality of the US dollar.”
Yellen’s fear is well-founded, since the status of the US dollar as a reserve currency eroded in 2022 at a rate “10 times the average annual pace of erosion in the USD’s market share in the prior years,” according to Eurizon SLJ Asset Management, explaining that the fall is partly due to other countries’ recent efforts to transition to national means of payment in international transactions.
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Thus, the dollar share of total world reserves fell to 47% last year, compared to 55% in 2021 and 67% in 2003, reports Business Insider’s stock market tracker Markets Insider, citing Eurizon strategists Joana Freire and Stephen Jen.
The outlet highlighted six growing challenges to the “dollar’s dominant role in international trade” and investment flows. According to the outlet, one of the main challenges is China, which seeks to weaken the dominance of the dollar by replacing it with the yuan in energy deals amid Beijing’s growing trade with Moscow.
Secondly, Malaysia has started talks with China to form an Asian Monetary Fund in an attempt to decouple from the dollar.
“There is no reason for Malaysia to continue to depend on the dollar,” Malaysia’s Prime Minister Anwar Ibrahim stressed in early April, adding that Kuala Lumpur and Beijing are already in talks to use the ringgit and yuan in trade deals.
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Meanwhile, Russia and Iran are cooperating on the creation of a gold-backed cryptocurrency, known as a type of “stablecoin” for its association with a real-world reference asset, which could replace the dollar in international exchanges. The two countries, facing US sanctions, plan to issue a “Token of the Persian Gulf region” for use in cross-border transactions. They intend to launch the stablecoin first in southern Russia, where intensive Iran-Russia trade deals are already being discussed.
Two additional challenges correspond to, firstly, Brazil and Argentina’s recent announcement of their willingness to launch a joint currency, the “sur,” to help boost South American trade, and secondly, the United Arab Emirates and India floating the idea of conducting non-oil trade in rupees.
Last but not least, Russia and China have started talks to develop a new reserve currency based on a collection of currencies from BRICS member states, including Brazil, Russia, India, China and South Africa, to challenge the dominance of the dollar.
Russian Foreign Minister Sergei Lavrov announced in February that BRICS is already actively working to increase payments in national currencies in mutual trade and financial operations due to the unreliability of the dollar.
(Sputnik)
Translation: Orinoco Tribune
OT/JRE/KZ
