With over 70 countries around the world actively moving away from the US dollar in international trade, de-community is gaining serious momentum. This trend includes ASEAN nations that carry out local currency reconciliations and develop alternative payment systems.
Meanwhile, as officials question the trust of the Federal Reserve, they believe that decooperative efforts in Europe are reaching unprecedented levels. BRICS countries are also working to abandon the US dollar, and countries are increasingly replacing the dollar in trade relations.
How BRICS, ASEAN and European countries accept decooperative trade
ASEAN takes historic step with formerly based emergency funds
Asia’s biggest economy has approved a groundbreaking rapid financing mechanism that will first use local currencies that include the Chinese yuan rather than the US dollar. The decision, which was made during a conference in Milan, Italy, is considered a major breakthrough for a country that seeks to reduce dependence on the dollar.
Ding Shuang, Chief Greater China Economist at Standard Chartered Bank, said this.
“Yuan’s inclusion in the CMIM system reflects the increasing acceptance of currency at the global stage, indicating a step forward in internationalization.”
China’s central bank governor Pan Gongsheng explained the move as follows:
“Breakthrough in diversifying the international monetary system in the region.”
CIS countries have achieved 85% local currency usage
The independent state federation has successfully implemented what could have been the most successful regional decooperative initiative to date. Countries use local currency rather than US dollars to make 85% of cross-border transactions.
This achievement shows how countries can cooperate when coordinating monetary policy effectively.
European officials question dollar dependence
Perhaps most surprising, we are now seeing the postponed sentiment reaching the European coast. European Central Bank officials are questioning whether they can continue to rely on the US Federal Reserve for dollar funds during market stress.
“We’re excited to see the future of our efforts,” said Jane Foley, who leads Rabobank’s Forex Strategy.
“Trump’s trade and foreign policy forced Europe to take a path to a decline in dependence on the US, which likely implies a desire to reduce dependence on the dollar.”
Foley also pointed out an interesting sarcasm.
“Trump threatened the country that tried to eliminate the dollar with extra tariffs. Ironically, his isolationist policies may promote the trend.”
The BRICS Alliance is leading global movement
The BRICS Alliance has created what appears to be the most organized challenge to dollar hegemony in recent years. Iran and Russia have completely eliminated the use of the dollar in bilateral trade.
Mohammad Reza Farzin, the central bank governor of Iran, was very clear about their progress.
“We (BRICS members Iran and Russia) have signed a currency contract with Russia and have completely removed the US dollar. Now we only trade in the ruble and the real.”
China has been particularly aggressive in promoting the use of Yuan, currently accounting for 47% of the total global transaction volume. Brazil currently trades with the Yuan and the Genuine China, and has opened an original clearing bank.
African countries implement bold policies
African countries are taking critical steps towards financial sovereignty. Tanzania officially bans the use of foreign currency in all local transactions, setting the stage for Kenya and other EAC countries. Nigeria has joined BRICS as a partner country and has expressed interest in using local currency in bilateral trade agreements. For Ghana, we are currently using gold to pay for oil imports.
Market impact and the future of the US dollar
Financial analysts warn that the ongoing spread of these deco-work could have serious consequences for the US economy. In addition to these concerns, Moody’s recent downgrade to US sovereign debt ratings further undermined belief in US assets as a safe haven.
Deutsche Bank has highlighted its recent analysis.
“There is a risk that a major change in capital flow allocation will take over from the currency foundations and that FX movements will become chaotic.”
Goldman Sachs analyst Jan Hatzius pointed out:
“We believe that recent dollar depreciation on a broad trade-weighted basis of 5% can go further.”
The situation is also complicated by domestic factors. Non-partisan analysts say Trump’s tax bill would add between $3 trillion to the country’s debt. The balloon’s financial obligations combine trade friction with weak confidence and are heavily overwhelmed in the US market.
At this point, this trend shows no signs of slowing down. In any case, it appears to be accelerating as more countries participate in existing initiatives.
