LAGRADA ONLINE | Published February 13, 2025
One of the world’s most significant currencies is the US dollar. It is important to remember that it is the primary reserve currency for many nations’ central banks. This indicates that governments and financial institutions keep substantial sums of money to maintain liquidity and economic stability. Furthermore, many international transactions, particularly those involving commodities like oil, take place in dollar bids. This makes it indispensable for economies all across the world, regardless of local currency.
Dollar bids will be completely banned in these territories after the CIS summit
Despite its significance in global markets, news in recent days has revealed that several nations have chosen to stop using it in cross-border business dealings. Eleven countries would stop using that currency for transactions to strengthen their currencies, lessen their reliance on the dollar, and obtain a competitive advantage in foreign exchange markets. After the United States placed sanctions on Russia during the conflict with Ukraine, the movement known as de-dollarization started to gather traction as the Commonwealth of Independent States (CIS) would be the nation that would stop doing business.
The decision was made during the CIS Summit, which took place in early January and saw the presidents of each country sign an accord to build a new financial environment. The following countries would abolish the currency:
- Armenia
- Turkmenistan
- Uzbekistan
- Azerbaijan Azerbaijan
- Belarus Belarus
- Moldova
- Russia
- Tajikistan
- Kazakhstan
- Kyrgyzstan
De-dollarization additionally represents a major shift in the financial system, lowering American sway over the world economy while establishing new, locally currency-based markets. Reducing exposure to the dollar can make a nation less vulnerable to U.S. currency fluctuations, including abrupt shifts in value brought on by U.S. policies or economic crises. Additionally, the nation can boost confidence in its currency by encouraging the use of the local currency rather than the dollar.
A positive feedback loop of more domestic investment, savings, and economic growth may result from this. Lastly, commercial and financial agreements in local or foreign currencies may become possible as a result of de-dollarization. This can diversify revenue streams and improve ties with regional business partners.
US dollar rises amid trade war concerns
Donald Trump approved massive tariffs on China, Canada, and Mexico on Monday, and he warned that the European Union will be slapped “pretty soon.” As a result, stock markets in Asia and Europe fell, and the dollar rose. The Year of the Snake began with a shocking decrease in Asia. Seoul, Jakarta, and Tokyo all saw losses of over two percent, while Sydney, Bangkok, and Wellington all saw losses of over one percent. Moreover, Hong Kong surrendered early significant losses to finish only slightly down, while Singapore and India also had declines. Shanghai was closed during the holiday.
Frankfurt and Paris both had losses of almost two percent, while London opened more than one percent lower. This was not surprising. Even though it has been telegraphed for weeks, investors will still be shaken as markets adjust to a decision that is nearly universally viewed as detrimental to financial stability and global growth, according to Stephen Innes of SPI Asset Management. The dollar surged 2.3% versus the Mexican peso and over 1% versus the Canadian dollar and euro on currency markets. Additionally, it was significantly stronger than the South African rand, Australian dollar, and South Korean won.
According to MUFG’s Michael Wan, they believe that the path of least resistance at the moment is for risk assets and Asian currencies to fall, along with higher risk premiums, to account for any significant tariff moves in the future beyond what we have already seen. Gold fell after hitting a new high above $2,800 last week as investors in other currencies found it more expensive to buy the metal due to the stronger dollar.
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SOURCE: www.lagradaonline.com
RELATED: De-Dollarization: 3 Countries Plan To Launch Own Currency
WATCHER.GURU | Published February 13, 2025
Several nations across the globe are eagerly waiting to disrupt the dominance of the US dollar. Time and again, countries were seen either endorsing a local currency or suggesting the launch of a new currency to replace the dollar. De-dollarization is an agenda that has garnered increased interest. Following in the footsteps of the BRICS nations, several were seen exploring different mediums to bring down the dollar. More recently, three African countries were seen showing interest in the same.
African Countries Explore De-Dollarization
Source: iStock
De-dollarization focuses on limiting the dependence on the US dollar for activities like global trade, as a unit of account, and even as a reserve currency. BRICS includes Brazil, Russia, India, China and South Africa. These countries have been exploring the use of an alternate currency for trade. Amidst this, three African nations including Niger, Mali, and Burkina Faso are preparing to create a new currency.
Military takeovers have occurred in all three of these former French territories in recent years. Currently, military administrations control these countries. With the plan to introduce a new currency, they are now adopting a strategy from the BRICS to uphold de-dollarization. The partnership of Sahel States (AES), a new defensive partnership, has also been established by the three African nations.
A new “West Africa” currency that is independent of the US dollar is what the AES bloc seeks. The three countries want to use the new currency instead of using the US dollar to settle trade. General Abdourahmane Tiani, the head of Niger’s ruling military junta further added,
“The currency is a first step toward breaking free from the legacy of colonization.”
Will These Nations Face Tariffs?
US President Donald Trump is not happy with the idea of the US dollar being replaced. Time and again Trump issued warnings of imposing 100% tariffs on nations that try to bring down the dollar or employ an alternate currency. He stated,
“We are going to require a commitment from these seemingly hostile Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs.”
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SOURCE: www.watcher.guru
