The de-dollarization efforts pushed by developing countries have no challenging effects on the US dollar’s global supremacy, say central bankers. Trump’s economic policies made emerging economies gang up to start trading in local currencies to uproot the USD’s dominant status. Despite repeated attempts to topple the greenback, it is still the most widely used currency for trade and transactions.
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Central Bankers Doubt If De-Dollarization Can Topple the US Dollar
Central bankers gathered for an annual conference in Portugal and the summit included a talk by European Central Bank President Christine Lagarde. She argued that the euro could become an alternative currency to the US dollar but the de-dollarization shift won’t happen quickly. Lagarde explained that it requires extensive financial and trade reforms which Europe is not prepared to handle at this time.
“For a major change to occur it will take a lot of time and a lot of effort,” she said, to which British, Japanese, and Korean central bankers agreed. “It’s not going to happen just like that overnight. It never did historically,” she said. De-dollarization is not a potent weapon against the US dollar as 58% of global reserves are held in the USD.
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Challenging your central bank reserves without a solid plan is as good as dropping an axe on your own feet. “I don’t see a sort of a major shift at the moment,” said Bank of England Governor Andrew Bailey on de-dollarization and the US dollar’s supremacy. Even Bank of Korea Governor Rhee Chang-yong stressed that developing nations are only talking against the USD but are not willing to take action as their GDP could fall drastically.
“It looks like people are talking about it (challenging the US dollar through de-dollarization). But at this moment they keep the dollar share while increasing their hedging ratio,” Chang-yong told the panel. In conclusion, Central Bank heads don’t believe the US dollar can be dethroned and its supremacy remains intact.