De-Dollarisation: Why The Dollar Is King and Where The Danger Lies

Is de-dollarization becoming a reality? Will the king dollar lose its reign? A number of news outlets are raising this question: is the U.S. dollar losing its dominance? The dollar is heading for its worst month in a year, barreling toward a 3.7 percent loss this month against six major currencies. At the same time, the BRICS group of major emerging economies—Brazil, Russia, India, China and South Africa—want to create a common currency for trade and investment between each other, to reduce their vulnerability to the dollar. The dollar share of official foreign exchange reserves has fallen to a 20-year low, and on top of all this, more and more countries are trading using their own currencies. The People’s Bank of China and the Saudi Central Bank recently signed a currency swap agreement worth nearly $7 billion, and China already has currency swap agreements with dozens of countries. The Chinese Yuan’s share of global transactions has now risen from almost nothing 15 years ago to 7 percent....