The de-dollarization initiative is taking over the world where a handful of developing countries are looking to stop using the US dollar for trade. The phenomenon gained steam after the US pressed sanctions on Russia in February 2022 for invading Ukraine. Since then, Russia teamed up with China and pushed the de-dollarization agenda to developing nations in Asia, Africa, and South America.
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While the idea sounds exceptional on paper, the reality is quite different and difficult to take charge of. Accept it, the US dollar is the de facto currency in the world for all trade and transactions. Local currencies are more volatile and less valuable than the US dollar at a given time. Therefore, the de-dollarization initiative sounds good on paper while in reality, doesn’t make sense to take on the US dollar.
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Developing countries need to strengthen their local currencies first to even consider challenging the US dollar. It’s taken the USD a century’s worth of work to be where it is today and replacing overnight is only wishful thinking. Therefore, de-dollarization and a rise of local currencies against the US dollar have only slim chances of succeeding.
US Dollar: De-Dollarization is a Joke, Explains Analyst
Jeffrey Christian, the founder of CPM Group highlighted that the US dollar is in demand even after threats from local currencies. He called the idea of de-dollarization a “bad joke” and explained that no country is dumping the US dollar. “It’s a myth, and it’s nonsensical, and it’s very persistent. It’s frighteningly persistent. No one is dumping US dollars,” Christian said on de-dollarization to Business Insider.
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Christian pointed out that the US dollar accounted for 88% of all daily currency transactions from April 2022, according to the Bank of International Settlements. In conclusion, Christian stressed that de-dollarization is a myth and a pipe dream that developing nations are peddling.