TRADE: Developing Nations Ditch U.S. Dollar for Local Currencies

Central banks across many developing nations are increasingly moving their reserves into gold and local currencies, reducing their reliance on the U.S. dollar.

This shift is driven by concerns over the massive $35 trillion U.S. national debt, which poses risks if global markets experience a downturn or recession. BRICS countries are particularly proactive in diminishing their dependence on the U.S. dollar while strengthening their local currencies.

The share of the U.S. dollar in global reserves has dropped significantly. Currently, it represents 59% of global reserves, down from 72% in 2002, as reported by the Atlantic Council. Over the past two decades, the dollar’s global reserve share has decreased by 13%, while China’s yuan has seen a 3% increase in its share.

Additionally, the Euro has also seen a reduction, falling 19% from its 28% share in 2008. According to Maria Zakharova from Russia’s Ministry of Foreign Affairs, the Euro’s share has decreased substantially over the past 16 years, while the Yuan has seen significant growth.

The BRICS nations are pushing for the use of their local currencies in international trade, putting further pressure on the U.S. dollar. If this trend of de-dollarization continues, the U.S. dollar’s share of global reserves could drop below 50% in the future, potentially leading to significant financial instability and market disruptions in the U.S.