US dollar losing its dominance

The US dollar’s share of global central bank reserves has continued to decrease, nosediving to 59.2 per cent in the third quarter of 2023, according to the latest data released by the International Monetary Fund (IMF). The decline comes amid the de-dollarization trend gaining momentum across the globe, RT reported.

IMF statistics show the greenback’s share is down from roughly 70 per cent in 2000. The dollar remains the world’s leading reserve currency with the euro coming second, while the latter’s share has slid to 19.6 per cent. The Japanese yen’s proportion of world reserves grew to 5.5 per cent from 5.3 per cent in the previous three-month period. The Chinese yuan, British pound, Canadian dollar and Swiss franc were little changed.

Meanwhile, according to data compiled by global financial messaging service SWIFT, the yuan’s share of international payments hit a record high in November, with the renminbi becoming the fourth most used currency worldwide. Cross-border yuan lending has risen as well, while the People’s Bank of China holds over 30 bilateral currency swaps with foreign central banks, including Saudi Arabia and Argentina, RT reported.

The growing share of the yuan in cross-border transactions reflects China’s trend of shifting away from the dollar, as well as Beijing’s efforts to promote the use of the renminbi, according to SWIFT.

The global trend towards using national currencies in trade instead of the US dollar began to gain momentum last year, after Ukraine-related sanctions saw Russia cut off from the Western financial system and its foreign reserves frozen, RT reported.

The US dollar is on track for its worst year since 2020. The US dollar index, a measure of how the currency is performing against six other currencies, is down over 2 per cent for the year. The dollar has been weakened by the prospect of rate cuts next year, CNN reported.