The global head of country risk at Fitch Solutions sees increasing adoption of cryptocurrencies, de-dollarization efforts by the BRICS countries, and China’s rising “economic power” as the main factors that will erode the dominance of the US dollar over time. mentioned as a factor. He warned that China would “exercise greater influence in global financial institutions and trade.”
Analysts explain why US dollar dominance is at risk
In an interview with CNBC on Sunday, Cedric Chehab, global head of country risk at Fitch Solutions, explained why the US dollar’s dominance is waning. Fitch Solutions provides financial information services. It is a division of Fitch Group, which includes Fitch Ratings, the world leader in credit ratings and research.
Analysts explained that the US dollar’s declining position would be a slow erosion rather than a paradigm shift, adding:
Dollar dominance will wane over time.
Chehab gave three main reasons why the US dollar is losing dominance. The first concerns China. “China is the largest trading partner for most economies, and its continued growth in economic power means China will exert greater influence in global financial institutions, trade, and more.”
Second, he explained that some economies want to diversify. For example, Russia is trying to cut itself off from the U.S.-led financial sector, he said, noting that sanctions imposed by the West are accelerating that effort. Chehab also noted that the BRICS bloc and his ASEAN countries are making similar efforts to reduce their dependence on the US dollar. BRICS consists of Brazil, Russia, India, China and South Africa. They are reportedly working on creating a new type of currency that will reduce reliance on the US dollar. ASEAN countries include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.
Analysts at Fitch Solutions also cited central bank digital currencies (CBDC) and cryptocurrencies as a third reason. Noting that they are “less talked about,” he cautioned:
Fundamentally, there will probably be less use of common currency. It will affect the US dollar.
Do you agree with the Fitch Solutions analyst? Let us know in the comments section below.
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