The US dollar has faced substantial headwinds over the last decade. The de-dollarization movement has made significant inroads globally. China, along with the other BRICS nations, has expressed its desire to use an alternative to the US dollar. The Chinese yuan has emerged as one such currency that many nations are turning to.

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De-Dollarization: Experts Weigh In On The Yuan Vs. USD War

According to IMF data, the US dollar accounted for 58% of global foreign exchange reserves. The figure was closer to 65% 10 years ago. The data highlights the growing de-dollarization sentiment.

While there is no doubt a decline in the dollar’s dominance, the strengthening of the yuan may be a little overstated. According to Lucy Ingham, editor-in-chief, FXC Intelligence, “This narrative is overstated and doesn’t give a true picture of what is really happening.“

According to James Lord from Morgan Stanley, “Which currency would you want to own when global stock markets start to fall, and the global economy tends to head into recession? You want to be positioning in US dollars because that has historically been the exchange rate reaction to those kinds of events.”

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Some experts have called for a trio of currencies in place of just the US dollar. According to Stephen Jen from Eurizon SLJ, “If I have to guess, it should be the [euro] and the [yuan] having roughly equal presence [in a tripolar currency system].“

Why The USD May Reign Supreme

While the de-dollarization is a growing agenda, dethroning the dollar is not as easy as many claim.

The yuan only accounts for 2.5% of global reserves. China’s strict law also presents considerable challenges. The lack of transparency within the Chinese system may also cause considerable problems for global trade.

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The US dollar-based system is a well-oiled machine. Replacing this system will take decades. The dollar’s supremacy is likely to continue for the foreseeable future.