The de-dollarization drive is currently taking over the world. The greenback is now witnessing a surge in its enemies as new foes emerge to derail its value.
The US dollar is currently at a precarious threshold, with ASEAN countries expediting efforts to topple it. These countries are working on their own currency system, one that challenges the US dollar and the Euro.
Singapore, one of the leading ASEAN nations, may suffer grave consequences if the de-dollarization drive gains momentum.
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Singapore: De-dollarization Risks and Impact
ASEAN nations are reportedly working on crafting their currency system. This currency system intends to rival the US dollar and unify the ten ASEAN blocs using a single currency on a global platform. However, launching a new currency and getting the required credibility to help push the currency to stabilize higher is a huge task.
Potential & Economic Consequences
In the meantime, ASEAN’s idea of ditching the US dollar for trade might prove detrimental to the nations as a collective. For instance, Singapore, often dubbed a financial hub for many reasons, may suffer a stark meltdown if it embraces de-dollarization.
Initially, the de-dollarization drive could cause Singapore to witness increased transaction costs due to currency conversions. A rapid shift may usher in volatility in the nation’s financial market, affecting the nation’s investor and entrepreneurial spirit.
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Threats to Singapore’s Open Economy
Considering its push away from the US dollar, Singapore’s open economy position could also be threatened. It may struggle to find new trade partners, as most global markets trade in US dollars. Its status as the world’s leading financial hub may also be jeopardized. The development may intensify further if the nation moves away from the US dollar.
US Dollar Remains The Undisputed King Of Currencies
Amid the worldwide de-dollarization drive raging, the US dollar has recently been referred to as the undisputed king of currencies. Analysts at Morgan Stanley have come up with new explanations, adding that the US dollar still stands strong amid all the currency mayhem and chaos.
“Which currency would you want to own when global stock markets start to fall? And the global economy tends to head into recession? You want to be positioned in US dollars. It is because that has historically been the exchange rate reaction to those kinds of events.” James Lord, MS head of strategy for emerging markets shared in a recent podcast.
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Similarly, Michael Zezas, the head of public policy at Morgan Stanley, reiterated the same analysis. Zezas shared how the dollar’s status will remain unhinged for long.
“Bottom line, King Dollar doesn’t really have any challengers.”