Several nations in the world were seen coming together in order to bring down the US Dollar through de-dollarization. This initiative garnered immense interest over the past year. BRICS nations, which include Brazil, Russia, India, China, and South Africa, led this cause and gave it momentum. De-dollarization focuses on lessening the dependence on the dollar. This would mean that trade settlements will be made in other currencies and alternative payment systems, as well as increased use of local currencies and diversification of foreign exchange reserves. While several feared the downfall of the greenback, a quick look through the past year gives a unique outlook.

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The US Dollar Moves Untethered

Even though de-dollarization is garnering traction, the US dollar remains quite strong. Looking back into 2024, several currencies fell to unforeseen lows. For instance, the euro dipped by 6.2% while the Japanese Yen registered a loss of over 10%. Amidst this, the US dollar was moving upwards.

The above image highlights how the US dollar was the only currency to record a positive growth in 2024. The USD surged by 7.1% throughout the past year. The worst-performing currencies were the Russian Ruble and Brazilian Real, as they sunk by 18.6% and 21.6%, respectively.

While this stands as proof that the dollar is moving untethered, there are several other reasons why it isn’t as easy to bring down the greenback.

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Exploring Other Factors

It should be noted that about 60% of global foreign exchange reserves are held in USD. Several cross-border payments rely on the US dollar. A notable chunk of international trade is carried out through this currency. A replacement for this in the next few years is close to impossible as other currencies aren’t as stable or reliable.

The Euro or the Chinese Yuan are great options but the limited convertibility and government controls make it difficult for the above-mentioned functions. While cryptocurrencies are considered a good option, the industry is still volatile. In addition, the regulatory hurdles of the ecosystem could be a challenge for global trade.

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