The phenomenon of de-dollarization is now taking a new turn. With Donald Trump assuming the role as the 47th US president, his stark governance policies that aim to bolster the US dollar might consist of a few offshoots. These so-called “offshoots” can be defined as policies that may ultimately boost the dollar but in the end may end up backfiring, alienating the American currency in the process. If the US dollar wobbles and falls, these 5 currencies might be the first to take a major hit. But before that, why is de-dollarization still advancing at rapid pace?
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Why Is De-Dollarization Still Leveling Up?
The de-dollarization narratives are primarily aimed at ditching the US dollar and removing the status of the dollar as the leading reserve currency. This phenomenon is now catching pace as the world is now pivoting towards a new financial order, called the “multipolar currency narrative,” that aims to streamline local currencies. This narrative has caught global attention as many countries have now been spearheading efforts to bolster their own currencies and emerge as leaders when it comes to the domain of economic prosperity and leadership.
The ideology is now spreading like wildfire across the board because several countries have lately been accusing the dollar of misusing its power and ordeal. For instance, the constant weaponization of the US dollar is one of the primary reasons leading this narrative.
Adding more to this, Donald Trump’s policies to bolster the US dollar by imposing tariffs on nations are also a deal breaker when it comes to restricting de-dollarization. Analysts believe this may propel countries to find alternate currencies to conduct trade with, ditching the US dollar on the long haul.
“Trump now wants to change that and force dollar dominance. That changes everything. If the US were to impose prohibitive tariffs across the board, they would cause massive disruption to the global economic system.” Leuchtmann wrote.
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5 Currencies To Suffer The Most If The American Currency Loses Its Position
If de-dollarization advances, as countries look for alternatives other than the US dollar, the first currency to take a major hit would be the US dollar. USD will lose its positioning, leading a domino trail of mishaps in its wake. It can lose its reserve currency status, which can spark a low USD global demand.
The Canadian dollar might be the next currency to wobble. The fall of the USD can harm USD-priced oil exports and the energy domain.
Third and fourth would be the Japanese yen and South Korean won, as they rely heavily on the US dollar when it comes to assisting certain industries, such as the USD-dependent semiconductor domain (South Korea). For the yen, decreased attention toward Japanese government bonds denominated in USD could portray a bearish stance.
Next in line is the Singapore dollar, which may take a hit in terms of USD-dependent markets that flourish in Singapore. These markets may show volatility as the USD wobbles, adding more pressure on the Singaporean currency.
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