Dedollarization emerges as a significant phenomenon, prompting changes in the global currency order.
The Decline of the Dollar in Global Reserves
The status of the dollar as a dominant reserve currency is eroding. At the end of 2024, the dollar's share in global foreign exchange reserves fell to 57.8%, the lowest since 1994. Financial analyst Wolf Richter explains this shift as central banks change their strategies. According to the IMF, the reduction of the dollar in reserves is coupled with an increase in gold reserves, signaling a shift in trust towards dollar stability. Political and trade instability also contributes to declining confidence, especially highlighted by former President Donald Trump's rhetoric.
The Rise of Unconventional Currencies
As the dollar's share declines, interest in other currencies such as the Japanese yen (5.8%), British pound (4.7%), Canadian dollar (2.8%), Chinese yuan (2.2%), and others increases. These currencies are becoming significant alternatives to mitigate exposure to the dollar. Richter calls this a 'progressive monetary fragmentation,' reflecting a change in the global reserve currency structure.
Cryptocurrencies: Alternative or Temporary Substitute?
Some discuss the potential for cryptocurrencies to become serious alternatives to the dollar. BlackRock CEO Larry Fink noted, 'If the United States fails to control its debt, America risks losing its leadership position in favor of cryptocurrencies.' This indicates a possible shift in the global currency hierarchy.
Changes in the global currency system should be monitored as they can significantly impact the global economy and investors.
