It is perceived that the US takes undue advantage of its position as the owner of the world’s reserve currency. It was unthinkable before but today countries that would not even consider it are actively exploring alternatives to the dollar.” The big push is owing to the US government’s reckless monetary policies in recent years. Vikas Gupta, CEO and Chief Investment Strategist, OmniScience Capital, remarks, “It represents a paradigm change. Why are countries stepping away from the comfort of the dollar? Only two years ago investors were running to the safety of the greenback in the aftermath of the pandemic. In this week’s cover story, we discuss why the de-dollarization trend is accelerating and how it will impact your investments It has implications for asset prices as well. This visible shift towards de-dollarisation represents a critical transformation and reshaping of the world order. Further, multiple countries have started exploring settlement of cross-border trade and investments in their own or alternate third-party currencies, ditching the dollar as the intermediary. They have been buying gold at the fastest pace since 1987. In 2022, central banks bought a whopping 1,126 tonnes of gold-the highest since 1950. Meanwhile, global central banks have been adding gold to their coffers, rather than stocking up on the dollar. Its market share was around 71% in 2001 (peaked at 85.6% in 1971 before the Nixon shock, when dollar’s convertibility into gold was suspended) The market share of the US dollar in world’s forex reserves fell to nearly 58% in March 2022-the lowest since 1994. Accordingly, countries have been pruning their dollar holdings in recent years. The US has long ceased to be the world’s largest trade economy, making way for China as the premier trade partner. While it remains the dominant global reserve currency, its clout is slowly fading. Once the undisputed sanctum for global monetary affairs, the omnipresent dollar is visibly losing its grip. The mighty US greenback’s hegemony is under threat.
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