Despite the Dedollarization Hype, the Buck Still Reigns Supreme

  • More people are fretting about de-dollarization.
  • China, Russia, and several other countries have upped their efforts to unseat the greenback.
  • These four charts show that despite the hype, the buck still reigns supreme among currencies.

As well as high inflation, rising interest rates, and the threat of an economic downturn, there’s a new buzzword that Americans are fretting about in 2023: de-dollarization.

There’s been a massive rise in the usage of the term – which refers to the efforts of China, Russia, and several other countries to undermine the greenback’s dominance of global trade and investments by promoting the use of other currencies –  on Twitter and in the media since Russia’s invasion of Ukraine upended the geopolitical order.

GS de-dollarization

Goldman Sachs Global Investment Research

Elon Musk, Mohamed El-Erian, and others have fueled the fire, warning that the buck could be under threat.

But they’re wrong.

People who believe that de-dollarization is happening at a rapid pace usually point to the fact that the greenback’s share of global reserves has fallen over the past two decades.

But it still makes up nearly 60% of the world’s foreign exchange holdings, according to the IMF. Its closest rivals – the euro, British pound, and Japanese yen – are all issued by allies of the US.


Meanwhile, the renminbi – which doomsayers fear could chip away at the dollar’s dominance due to Beijing asking its trade partners to settle contracts using the yuan – has barely seen its share of global reserves tick up, and accounted for just 2.7% at the end of last year.

The dollar also remains far more dominant than any other currency when it comes to trade.

The Federal Reserve’s international currency usage index – which tracks foreign exchange transactions, debt instruments, and cross-border deposits and loans – shows the greenback has retained a steady share of around 70% of the transactions market for the past two decades:


And again, the renminbi has barely made in that dominance, with a share of just 3%.

Lastly, it’s worth asking dollar skeptics which currency could possibly replace the greenback.

China appears to have centered its hopes around a new reserve currency that would be pegged to the exchange rates of Brazil, Russia, India, China and South Africa, who make up the BRICS group of nations. Leaders of the five countries are expected to discuss that initiative in South Africa next month.

But four of the five currencies slipped against the dollar over the past year, with the ruble plummeting 37% amid Russia’s ongoing war in Ukraine – so it’s unlikely that any BRICS-pegged reserve would prove any more appealing than the greenback to currency traders.


“I hear this story all the time,” OANDA market analyst Jeff Halley told Insider previously, when news broke that the BRICS group were weighing up developing a new reserve. 

“[The dollar] is the currency of the largest economy, used in the largest and deepest capital markets in the world, and is freely convertible,” he added. “None of that applies to the BRICS currencies – I’d rather be paid in US dollars than rand, real, rubles, rupees, or yuans, thank you very much.”

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