The US dollar’s global supremacy is reportedly eroding at an exponential rate, with countries backing away after witnessing how America used USD to impose sanctions against Russia.
In a new Bloomberg report, Stephen Jen and Joana Freire of asset management firm Eurizon SLJ Capital reveal that in 2022, the US dollar’s market share in global reserves plunged 10 times its average speed of the past 20 years.
Considering the fluctuations in exchange rates, the dollar lost about 11% of its market share since 2016 and twice that amount since 2008.
Jen and Freire say in an investor note that countries located in Asia, Latin America, Africa, the Carribean and the Pacific Islands – collectively known as the Global South – are shedding their dollar reserves as they look for an alternative to avoid sharing Russia’s fate.
“The dollar suffered a stunning collapse in 2022 in its market share as a reserve currency, presumably due to its muscular use of sanctions. Exceptional actions taken by the US and its allies against Russia have startled large reserve-holding countries.”
According to Jen and Freire, the dollar now accounts for 58% of global reserves, drastically down from 73% over two decades ago when the currency was considered as the “indisputable hegemonic reserve.”
Although the dollar’s dominance appears to be on the decline, Jen and Freire note that the USD’s status as the world’s reserve currency is unlikely to change in the near future as emerging economies continue to depend on the greenback to settle international trades.
However, the duo warns that the developing countries’ reliance on the US dollar is not “preordained,” and it is possible that more nations hop on the trend of de-dollarization.
“The prevailing view of ‘nothing-to-see-here’ on the US dollar as a reserve currency seems too innocuous and complacent. What needs to be appreciated by investors is that, while the Global South is unable to totally avoid using the dollar, much of it has already become unwilling to do so.”
Follow us on X, Facebook and TelegramDon't Miss a Beat – Subscribe to get email alerts delivered directly to your inbox
Check Price Action
Surf The Daily Hodl Mix
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any losses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Featured Image: Shutterstock/Tithi Luadthong/VELvector
