The US dollar has lately been living in its “soft era,” which the markets all over the world are not particularly fond of. This softer USD era is full of fluctuations and volatility, with the DXY index touching new lows, taking the US economy down a notch. In addition to this, the world is currently in a tizzy, as attention shifts back to metal, hitting the US dollar-denominated assets badly. While the dollar’s lackluster price performance is worth debating, should we really consider this narrative as part of a larger de-dollarization narrative? Is de-dollarization real, or is it just USD dominance taking a step back?
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De-Dollarization: Myth or Reality?
De-dollarization is an ambitious phenomenon. A process where the world gently yet steadily moves away from the dollar, the reliance on USD cuts off, and it’s left to decay slowly and gradually. While this phenomenon has certainly begun, the undercurrents of the change have started to show effect. But de-dollarization is a grand narrative, a process that requires replacing the US dollar as a global reserve asset. This is huge, and per a notable platform Economics TD, it is a process that is not “realistically on the cards to happen sometime soon.”
“It is all but certain that many economies’ quests to reduce their reliance on the U.S. dollar will continue apace in the coming years, but completely displacing the USD as the global reserve currency and the central currency in international trade and finance is not realistically in the cards. The U.S. dollar and U.S.-dollar-denominated assets exist in far greater supply. As it stands, there is little evidence that de-dollarization has accelerated. Flows into dollar-based assets have returned to trend, dollar use has been relatively stable. Official reserves are mostly unchanged, and the world still lacks a convincing alternative. The US dollar remains, by far, the most widely available, freely traded, and commonly accepted currency, in part because it has been issued by the world’s largest economy for nearly 80 years now. This is a privileged position that cannot be dislodged from quickly.”
US Dollar Dominance Affected?
The Federal Reserve’s policy decisions and Donald Trump’s tariff regime have recently weakened the dominance of the US dollar. However, to think that the world is spearheading the de-dollarization agenda would be a far-fetched idea, considering that the US dollar remains the king of currencies, dominating most of the world trade narratives at best.
“The King still reigns supreme 👑💵. In 2025, the US dollar holds a massive 58% of global allocated foreign exchange reserves worth over $11.5 trillion total. Euro: 20%. Japanese Yen: 6%. Pound Sterling: 5%. Canadian & Australian Dollars: ~5% combined. Chinese Renminbi: just 2%. Others: the rest. Despite all the de-dollarization talk, no one’s come close to challenging USD dominance,” as shared by Jack Prandelli.
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