Politics will drive growth in trade de-dollarisation

Significance

A move away from the US dollar is gaining momentum, driven by the West’s use of economic sanctions, high levels of sovereign debt and a desire to de-link monetary policy from the US Federal Reserve. Trade settlement in the renminbi is increasing but the US dollar remains dominant in savings and price setting.

Impacts

• A significant move away from the US dollar would likely weaken its value and increase interest rates in the United States.
• The use of the US dollar for pricing and savings will remain dominant for the foreseeable future.
• The expansion of Chinese swap lines and lending from development banks would undermine the role of the US dollar in pricing and savings.
• A shift away from the US dollar would reduce Washington’s ability to deploy economic sanctions and other restrictions.
• Countries, including China, may experience companies using an increasing range of currencies depending on their trading partners.