The U.S. dollar has dominated world trade and capital flows for many years. However, many countries are looking for alternatives to reduce their dependence on the U.S. currency. This trend has accelerated since the U.S. and other Western countries imposed sanctions against Russia over the Russia-Ukraine conflict in 2022. For instance, Brazil and Argentina have discussed creating a common currency for South America, the UAE and India are negotiating the use of rupees for commodity trade, and Saudi Arabia has announced that it is open to trading in currencies other than the U.S. dollar.
Another step toward de-dollarisation was taken by Brazil and China this week as they announced an upcoming deal to carry out trade and financial transactions directly, bypassing the U.S. dollar. According to the People’s Bank of China, the agreement will boost the use of the yuan for cross-border transactions between businesses and financial institutions, as well as simplify trade and investment between the two countries. China and Brazil will carry out transactions directly through the exchange of yuan for reais and vice versa.
‘The impact of China and Brazil’s de-dollarisation efforts is significant, as China is Brazil’s largest trading partner, accounting for more than a fifth of all Brazilian imports. Conversely, Brazil exports 31% of its goods to China,’ said Kar Yong Ang, an OctaFX financial market analyst.
Despite the active pursuit of de-dollarisation, it is unlikely that the U.S. currency will lose its dominant status owing to the significant dollar reserves held by major central banks worldwide. However, a shift towards de-dollarisation is already evident from the growing purchases of gold by central banks, which serves to reduce their exposure to the U.S. dollar. Since March 2023, the dollar has shown weakness against regional currencies, and this trend is expected to continue, possibly leading to EURUSD, GBPUSD, and gold prices rising.
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OctaFX is an international broker that has been providing online trading services worldwide since 2011. It offers commission-free access to financial markets and a variety of services already utilised by clients from 180 countries with more than 21 million trading accounts. Free educational webinars, articles, and analytical tools they provide help clients reach their investment goals.
The company is involved in a comprehensive network of charitable and humanitarian initiatives, including the improvement of educational infrastructure and short-notice relief projects supporting local communities.
OctaFX has also won more than 60 awards since its foundation, including the ‘Best Online Broker Global 2022’ award from World Business Outlook and the ‘Best Global Broker Asia 2022’ award from International Business Magazine.
