Markets World

Reviewing the U.S Dollar as the major currency

The weaponisation of the dollar is forcing central banks to reconsider their dollar holdings. Russia and China have been planning for a de-dollarisation for decades, selling off their dollars and filling their vaults with gold and alternative reserve currencies.

Some believe de-dollarisation will be a lengthy process, but the comfortable power of the dollar as the world’s reserve currency is on the inevitable decline. History is full of sudden currency collapses. Argentina, Hungary, Ukraine, Iceland, Venezuela, Zimbabwe and Germany have all experienced terrible currency crises since 1900.

As soon as users stop believing that a currency is useful, that currency is in trouble. Ever since the Bretton Woods Agreement in 1944, other major governments and central banks have relied on the U.S. dollar to back up the value of their own currencies.

Through its reserve currency status, the dollar receives extra legitimacy in the eyes of domestic users, currency traders, and participants in international transactions. The U.S. dollar is not the only reserve currency in the world, though it is the most prevalent.

As of March 2022, the International Monetary Fund (IMF) approved four other reserve currencies: the euro, British pound sterling, Japanese yen, and Chinese yuan.

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