The first half of 2024 witnessed a notable increase in the momentum of dedollarisation globally. This movement is being driven by various geopolitical, economic, and strategic factors, as countries seek to diversify their currency holdings and reduce vulnerability to US monetary policy and economic sanctions. Analysts from DBS, Philip Wee and Ma Tieying, have highlighted the growing trend of countries looking to reduce their reliance on the US dollar and other Western reserve currencies.
Countries are not aiming to completely decouple from the US dollar, but rather to decrease their dependence on the greenback and other Western currencies. This shift is partly a response to rising geopolitical tensions, particularly between the US and Europe against countries like Russia and China. In addition, there is a push to develop alternative financial institutions and systems that reduce reliance on traditional institutions such as the IMF and the World Bank. The growth of the BRICS alliance could also lead to increased influence in international forums like the United Nations and the G20, offering a counterbalance to Western alliances.
Despite the fact that the US dollar still dominates global FX transactions, accounting for nearly 90% of trade and investments, the dedollarisation process is expected to have long-term implications for global markets, trade dynamics, and the international monetary system. As countries look to diversify their currency holdings and reduce reliance on the US dollar, there may be shifts in trading patterns and the balance of power in international financial systems. This could lead to changes in how global trade is conducted and could impact international relations.
As countries continue to explore alternatives to the US dollar and Western reserve currencies, there is a growing focus on developing new financial institutions and systems that offer greater independence from traditional institutions like the IMF and the World Bank. The BRICS countries, in particular, are looking to strengthen their alliance and increase their collective influence on the global stage. This could potentially lead to a shift in the balance of power in international forums, offering a counterbalance to Western alliances like NATO and the EU.
The momentum of dedollarisation is part of a broader trend towards reducing dependence on the US dollar and other Western reserve currencies. Countries are looking to diversify their currency holdings and reduce vulnerability to US monetary policy and economic sanctions. The growth of alternative financial institutions and systems, as well as increased collaboration among countries like the BRICS alliance, is expected to have long-term implications for global markets, trade dynamics, and the international monetary system.
In conclusion, the momentum of dedollarisation in the first half of 2024 reflects a global shift towards reducing reliance on the US dollar and Western reserve currencies. This movement is being driven by various geopolitical, economic, and strategic factors, as countries seek to diversify their currency holdings and reduce vulnerability to US monetary policy and economic sanctions. As countries explore alternative financial institutions and systems, there may be significant implications for global markets, trade dynamics, and the international monetary system in the long term.
