Renowned Canadian economist and University of British Columbia professor emphasizes the declining importance of the US dollar in international trade and as a reserve currency, stating that “other currencies are gaining significance in international transactions and as reserve currencies.”
Last week, James Brander, a Canadian economist, and professor specializing in Asia Pacific studies within the Strategy and Business Economics Division at the University of British Columbia, expressed his views on the global de-dollarization trend and the diminishing influence of the US dollar.
Shifting Dynamics: US Dollar’s declining dominance in global transactions
According to a report from Press TV, the economist highlighted that the global dominance of the US dollar is declining as more countries are choosing to conduct their international transactions using their own local currencies rather than relying on the USD. Although acknowledging that the US dollar still holds a significant position as the major reserve currency, with over half of the world’s international currency reserves in USD, he emphasized that the role of the US dollar has been on a downward trajectory, stating, “It’s still substantial, but it has been declining.” The economist further commented:
“ 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. “
Rise of local currencies
Professor Brander reiterated that there is an increasing trend of using local currencies for international transactions. He highlighted that transactions between countries like India and Russia are now being conducted using their respective currencies rather than relying on the US dollar. He expressed his support for this shift, stating, “I don’t see a problem with that.”
Many analysts attribute the imposition of economic sanctions by the US, particularly on Russia, as a significant factor driving other nations to shift away from the US dollar. Last month, US Treasury Secretary Janet Yellen acknowledged the risk of financial sanctions linked to the role of the dollar, stating, “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.”
BRICS and Southeast Asia embrace De-Dollarization efforts
The de-dollarization initiatives have been gathering momentum within the BRICS nations (Brazil, Russia, India, China, and South Africa). The economic bloc is actively exploring the creation of a common currency that would assist its members in reducing their dependence on the US dollar. The upcoming leaders’ summit in August is anticipated to involve discussions on this matter. Furthermore, a group of ten Southeast Asian nations has recently reached an agreement to promote using their national currencies in transactions.
The emergence of alternative currencies, the diversification of central bank reserves, and the increasing adoption of local currencies in international transactions all signify a shift away from the US dollar. The imposition of economic sanctions by the US has also played a role in encouraging nations to seek alternatives to minimize their exposure to such risks.
In conclusion, the importance of the US dollar in international transactions and as a reserve currency is gradually declining, as highlighted by economists and global trends. Factors such as the rise of emerging markets, technological advancements, geopolitical shifts, and policy decisions have all contributed to this trend. While the US dollar continues to hold a significant role as the major reserve currency, the gradual erosion of its dominance calls for careful consideration and strategic responses from policymakers.
Overall, while the US dollar’s decline is gradual, it serves as a reminder that no currency remains dominant indefinitely. The future of global finance lies in a more diverse and interconnected monetary system where multiple currencies play pivotal roles.