Brazil’s call for a common Brics currency at the Johannesburg summit last month has reignited the debate over de-dollarisation. In recent years, more countries have moved towards carrying out trade in currencies other than the US dollar.
This is not new. The dollar’s supremacy has been increasingly questioned – from Latin American states like Brazil to Southeast Asian nations – since the 2008 global financial crisis. But the trend needs to be put into perspective: the dollar remains dominant in global foreign exchange reserves, accounting for 59 per cent in the first quarter of the year, according to the latest data from the International Monetary Fund.
De-dollarisation is the process of reducing reliance on the dollar as a reserve currency, a medium of exchange or a unit of account in the global economy. Aside from the enormous implications this has for global financial markets and international trade, given the dominance of the United States in the global economic system, it also has important political implications.
Some countries seek to de-dollarise to diversify their…