Global Shifts Undermine US Dollar’s Reserve Currency Status
(MENAFN) Protectionist trade strategies are undermining the US dollar’s role as the leading global reserve currency, as efforts toward de-dollarization gain traction amid increasing demands for a different worldwide monetary framework.
The US Dollar Index declined by over 11 percent during the first half of the year, settling at 97, marking its poorest six-month outcome since 1973.
The index has dropped 7 percent following US President Donald Trump’s announcement of extensive reciprocal tariffs on April 2.
The disintegration of international trade and geopolitical instability are driving central banks and investors to move away from the US dollar, turning instead to alternatives such as gold, the euro, and the Chinese yuan.
Since the year began, the dollar has depreciated more than 12 percent relative to the euro, primarily influenced by Trump’s policies, which have reduced the US trade deficit but sparked worries about increasing borrowing expenses.
China has maintained a tight peg of the yuan to the dollar, enabling Chinese export prices to stay competitive in vital markets like Europe.
The BRICS coalition — comprising Brazil, Russia, India, China, and South Africa — has expedited its efforts to conduct transactions bypassing the dollar.
Trump stated on Tuesday that this group is attempting to dismantle the US currency and pledged to halt these moves.
A poll by the Official Monetary and Financial Institutions Forum revealed that 80 percent of central banks express concern about the political climate in the US, while a net 16 percent of respondents intend to boost their euro holdings in the next 12–24 months, and 32 percent plan to increase their gold reserves over the same timeframe.
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