In what comes a blow to the de-dollarization movement, the world seems to be using more US dollars (USD) than ever before. According to reports, offshore USD deposits held in banks outside the US have climbed to a record of around $14.5 trillion. The surge represents an over 220% increase from the beginning of the 21st century, when the figure was close to $4.5 trillion.
Is De-Dollarization Slowing Down?
Apart from the $14.5 trillion worth of USD kept in offshore banks, the Federal Reserve and domestic commercial banks hold over $19.0 trillion worth of USD. While USD use seems to be going up, only $3.5 trillion worth of euros are kept in banks outside the eurozone. The development suggests that demand for US dollar has significantly increased.
The de-dollarization movement has seen substantial subscribers over the last decade. China, in particular, has increasingly pushed its yuan for global settlements. However, no other currency comes close to the US dollar’s dominance. Even the yuan pales in comparison.
The rising demand for the US dollar could be due to investors opting for the greenback as a safe haven during times of uncertainty. The US-Iran conflict is a likely trigger for the development. Moreover, the Federal Reserve decided to keep interest rates unchanged after its April FOMC (Federal Open Market Committee) meeting. Higher rates may have led to investors opting for safer bets, such as the US dollar.
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While several nations have pushed for other national currencies for international trade, there is little chance for other fiats to compete with the US dollar. With global uncertainties rising, the US dollar seems like the only stable option for trade. Even gold has seen major price fluctuations over the last few months.