Paul Gruenwald, the lead economist at S&P Global, anticipates a shift in the status quo of the U.S. dollar, predicting its gradual decline from the position of the ‘preeminent world currency’. The London conference hosted by the ratings agency was the stage where Gruenwald made these remarks on Tuesday.
Commenting on the dwindling clout of the USD, Gruenwald mentioned that the currency is “experiencing a gradual waning in its influence… We see a subtle fragmentation taking place.” He further expounded on his insights:
We are observing considerable movements taking place outside the dollar sphere.
Following the stern U.S. sanctions, which included the freezing of approximately $300 billion of Russia’s reserves in the previous year, various countries are progressively distancing themselves from the U.S. dollar, preferring to lean more on their national currencies for trade settlements.
The S&P Global economist accentuated this trend of countries shifting their preference away from the U.S. dollar, exemplified by the escalating usage of the Chinese yuan in global trade. In addition, he noted that China’s development banks, such as the Asia Infrastructure Investment Bank and the New Development Bank (also known as the BRICS Bank), provide attractive financing options.
Gruenwald stated that while the U.S. dollar “will continue to be a significant world currency, it’s dominance as the chief world currency is poised to decline.”
In a related development, the BRICS nations are exploring a unified currency that could potentially undercut the U.S. dollar’s supremacy. Robert Kiyosaki, the author of Rich Dad Poor Dad, echoed these sentiments on Tuesday, claiming that the U.S. dollar “is on its last legs,” given the BRICS countries’ purported plan to introduce a gold-backed currency. Invesco, an asset management firm, discovered in a study that central banks are lowering their U.S. dollar reserves and aim to augment their exposure to the Chinese yuan. Esteemed investor Jim Rogers issued a warning regarding the further depreciation of the U.S. dollar’s value.
Frequently Asked Questions (FAQs) about De-dollarization
What is the prediction of the S&P Global’s chief economist about the US dollar?
Paul Gruenwald, the chief economist at S&P Global, predicts a decline in the dominance of the U.S. dollar as the primary world currency, citing increased de-dollarization and use of national currencies in trade settlements by various countries.
What is causing countries to de-dollarize?
The de-dollarization trend has been largely prompted by aggressive U.S. sanctions, including the freezing of Russia’s reserves worth around $300 billion last year, which have led numerous countries to prefer their national currencies for trade settlements.
Which currency does the economist highlight as growing in popularity?
The economist, Paul Gruenwald, highlights the Chinese yuan as a currency growing in popularity for international trade, a trend supported by cheap financing options provided by Chinese development banks like the Asia Infrastructure Investment Bank and the New Development Bank.
Is the US dollar expected to completely lose its status as a world currency?
While the U.S. dollar’s dominance is expected to wane, it is still anticipated to continue as a significant world currency. The shift is seen as a move from a singular dominance to a more fragmented system of world currencies.
More about De-dollarization
- S&P Global’s official website
- Overview of De-dollarization
- The BRICS nations and their potential common currency
- Understanding US Sanctions
- The Role of Chinese yuan in global trade
- Insights from Invesco on currency exposure
- Asia Infrastructure Investment Bank
- New Development Bank