JP Morgan has acknowledged that de-dollarization is rising and is shaking the foundation of the US dollar. In a recent note to stakeholders, the global bank highlighted that the US dollar is prone to more weakness. This comes as the DXY index, which measures the USD’s value against a basket of currencies struggles in the charts. The index is barely sustaining above the 98 level and retraces to the 97-96 range immediately since five months.
Julia Wang, JP Morgan’s Global Market Strategist wrote that various de-dollarization initiatives are driving the US dollar into weaker territory. For the uninitiated, the DXY index is down close to 10% year-to-date and is standing on a fragile knee. A 10% dip is the largest drop recorded since 1973 making the greenback a risky asset to trade in 2025. Other leading global currencies have slightly outperformed the USD in the forex markets this year.
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JP Morgan on De-Dollarization and the US Dollar
The bank highlights that developing countries have begun settling commodity trades in local currencies and have sidelined the US dollar. While JP Morgan acknowledges that de-dollarization is real and is growing, the threat is still at its nascent stages. Julia explained that no real alternative currency has appeared yet to replace the US dollar’s dominance on the global stage.
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While JP Morgan says the currency wars and de-dollarization exist, it’s a slow drift rather than a direct challenge to the USD’s supremacy. Emerging nations are figuring out how to diversify their Central Bank assets but cannot bank on other currencies. Therefore, they are relying more on gold than on accumulating local currencies, which signifies that other national currencies are not strong.
Finally, citing de-dollarization, JP Morgan’s Julia Wang recommends international diversification of assets for US-based investors. She added that non-US investors can take long exposure on the US dollar as the comeback could be stronger. The USD made its way to the top every time after a global turmoil and this time is no different.