Chip

<p><strong>The decades-long dominance of the US dollar is coming to its inevitable end due to new challengers emerging.</strong></p>
<h2 style="text-align: center;" id="challengers">Challengers</h2>
<p>The US dollar&#8217;s dominant position in the global financial system is <a href="https://news.bitcoin.com/chinese-yuan-euro-digital-currencies-challenge-us-dollar-dominance-td-economist-says/" target="_blank" rel="noopener">being challenged</a> by the Chinese yuan, the euro, and digital currencies, according to a senior economist at TD. The economist highlighted that several countries are frustrated with the dollar&#8217;s dominance and are seeking alternatives for international trade and cross-border banking.</p>
<h2 style="text-align: center;" id="long-term-trend-away-from-us-dollar-says-economist">Long-Term Trend Away from US Dollar, Says Economist</h2>
<p>Vikram Rai, a senior economist at TD, discussed the global de-dollarization trend and potential contenders to the US dollar in a recent note. He mentioned the Chinese yuan, the euro, and central bank digital currencies (CBDCs) as significant challengers. Although the US dollar remains the most used currency, Rai emphasized the long-term trend moving away from it. He pointed out that countries are expressing frustration with the dollar&#8217;s dominance and actively exploring alternatives.</p>
<blockquote class="twitter-tweet">
<p dir="ltr" lang="en">Quincy Institute: It is a fact that the undisputed dominance of the US dollar is declining&#8230; <a href="https://t.co/opBT4pauFZ">pic.twitter.com/opBT4pauFZ</a></p>
<p>— Sprinter (@Sprinter99880) <a href="https://twitter.com/Sprinter99880/status/1663594071032463381?ref_src=twsrc%5Etfw">May 30, 2023</a></p></blockquote>
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<h2 style="text-align: center;" id="motivation-to-reduce-dependence-on-the-dollar">Motivation to Reduce Dependence on the Dollar</h2>
<p>Rai highlighted that the US government&#8217;s decision to freeze the Russian central bank&#8217;s foreign currency reserves in 2022 motivated countries to reduce their reliance on the US dollar. China, <a href="https://walletinvestor.com/magazine/chinese-yuan-gains-ground-in-cross-border-transactions-us-dollar-share-declines" target="_blank" rel="noopener">in particular</a>, has been leading de-dollarization efforts by trading crude oil in yuan and conducting trade with countries like Brazil, India, and Russia using their local currencies or the renminbi. This poses a significant challenge to the &#8220;petrodollar&#8221; system, where most global oil sales are priced in US dollars.</p>
<h2 style="text-align: center;" id="efforts-to-chip-away-at-dollar-dominance">Efforts to Chip Away at Dollar Dominance</h2>
<p>Rai mentioned incremental efforts to diminish the dollar&#8217;s status, such as the proposed common currency among BRICS countries. Although a full-fledged currency union among these diverse economies is unlikely, it signals a commitment to conduct more trade and finance without relying on the US dollar.</p>
<blockquote class="twitter-tweet">
<p dir="ltr" lang="en">The BRICS bloc of countries is pushing ahead with plans this year to expand its membership and tackle the dominance of the US dollar in global trade.<a href="https://t.co/AAkxppAlh7">https://t.co/AAkxppAlh7</a></p>
<p>— Al-Estiklal English (@alestiklalen) <a href="https://twitter.com/alestiklalen/status/1665825570750451712?ref_src=twsrc%5Etfw">June 5, 2023</a></p></blockquote>
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<h2 style="text-align: center;" id="yuan-euro-and-cryptocurrencies-as-primary-challengers">Yuan, Euro, and Cryptocurrencies as Primary Challengers</h2>
<p>The economist identified the Chinese yuan and the euro as the primary challengers to the US dollar. However, he acknowledged certain hurdles for the yuan, including limited convertibility and availability outside of China. Rai also recognized the potential of digital currencies, including CBDCs, to erode the dollar&#8217;s position by eliminating the need for it in payment settlements. He noted that central banks are still in the early stages of exploring CBDCs, and it will take several years to establish the legal and governance framework.</p>
<h2 style="text-align: center;" id="prospects-of-a-multipolar-international-regime">Prospects of a Multipolar International Regime</h2>
<p>Rai concluded that within the next decade or two, a multipolar international regime could emerge, with the roles currently held by the US dollar shared with the euro, a more open yuan, future CBDCs, and other potential options. The rise of regional currencies and digital platforms could reshape the global financial landscape.</p>
<h2 style="text-align: center;" id="brics-currency-8217-s-potential-as-a-global-currency">BRICS Currency&#8217;s Potential as a Global Currency</h2>
<p>Economist Alexis Habiyaremye from the University of Johannesburg discussed the potential of a common currency among BRICS countries to challenge the US dollar&#8217;s global reserve currency status. He highlighted that such a currency would alleviate the burden of financing the US deficit and enable these countries to avoid arbitrary US laws. However, Habiyaremye emphasized that the success of a BRICS currency depends on political will, increased trade between member countries, and reduced reliance on the US dollar. Trading more with each other would strengthen the viability of a new BRICS currency.</p>
<blockquote class="twitter-tweet">
<p dir="ltr" lang="en">DEBATE: Could a BRICS currency end the global dominance of the US dollar?<a href="https://t.co/TEceLRkg9q">https://t.co/TEceLRkg9q</a></p>
<p>— Charles Onyango-Obbo (@cobbo3) <a href="https://twitter.com/cobbo3/status/1666127043434623004?ref_src=twsrc%5Etfw">June 6, 2023</a></p></blockquote>
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<h2 style="text-align: center;" id="summary">Summary</h2>
<p>The US dollar&#8217;s dominant position in the global financial system is being challenged by the Chinese yuan, the euro, and digital currencies. Countries are frustrated with the dollar&#8217;s dominance and seeking alternatives for international trade and banking. Efforts to reduce reliance on the dollar include trading oil in yuan and exploring digital currencies. The rise of regional currencies and digital platforms could reshape the global financial landscape. However, the transition away from the dollar will take time and require a clear legal framework.</p>

US Dollar Dominance Faces Serious Challenges Economist Says

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