A global backlash against the hegemony of the US dollar is forming.
Recently, Brazil and China agreed to settle trade in their own national currencies instead of using the US dollar.
US Dollar Global Backlash and the Rise of Alternative Currencies
In April, an agreement was made between India and Malaysia to increase the use of the rupee in international trade.
Even longtime American ally France is beginning to conduct business in yuan.
Currency experts are wary of coming across as the Cassandras who, shamefully, have repeatedly prophesied the end of the dollar over the previous century.
Yet, they notice the kind of real action, however tiny and gradual, that was generally lacking in the past as they watch this unexpected wave of agreements geared at dodging the dollar.
Their justifications for implementing these measures are quite similar for many world leaders.
They claim that the dollar is being weaponized and is being used to further American foreign policy aims and punish those who disagree with them.
Nowhere has that been more obvious than in Russia, where in response to the invasion of Ukraine, the US has inflicted unparalleled financial hardship on Vladimir Putin’s government.
In collaboration with Western allies, the Biden administration has imposed sanctions, frozen hundreds of billions of dollars’ worth of Moscow’s foreign exchange reserves, and all but expelled the nation from the world banking system.
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Redefining Global Financial Dynamics
Regardless of what people may think of the war, it has served as a striking reminder of the world’s own reliance on the dollar.
Clearly, China is influencing some of the move away from the dollar. President Xi Jinping wants to give the yuan a wider place in the world financial system, and his administration has prioritized using the currency abroad.
India, who is hardly China’s strategic friend, and Malaysia unveiled a new system in April for conducting cross-border rupee trading.
It is a part of a larger initiative by the Narendra Modi administration to avoid using the dollar for at least certain foreign transactions.
This administration has not endorsed the US-led sanctions campaign against Russia.
The Association of Southeast Asian States decided to increase the use of its members’ currencies in regional trade and investment one month later.
Yet just a few weeks ago, an agreement to encourage direct exchanges of the won and rupiah was inked by South Korea and Indonesia.
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