DE-DOLLARIZATION

Why are countries moving towards de-Dollarization?

We are seeing a global shift, as countries look for alternatives to the Greenback as the sole reserve currency — for various reasons

Let’s look at the historical perspective first. The US dollar has been the dominant currency in global trade and finance for decades, and its status as the world’s reserve currency has given the United States significant economic and geopolitical power. The dollar’s dominance has been driven by a number of historical factors, including the US’s position as the world’s largest economy, the strength and stability of the US financial system, and the country’s political and military power.

The first signs of this dominance started to show post the First World War — when the dollar began to displace the Pound Sterling as the international reserve currency and the U.S. also became a significant recipient of wartime gold inflows. This position strengthened further after World War II. The Bretton Woods Agreement of 1944 established the US dollar as the world’s reserve currency, and other countries agreed to peg their currencies to the dollar. U.S. ceased the direct convertibility of U.S. dollars to gold in 1971. This ended both the gold standard and the limit on the…