While we find this a useful framework to assess the extent of de-dollarisation, we prefer to examine the challenge to the dollar’s dominance through the three key areas: of i) trade and commerce, ii) the asset side (store of wealth) and iii) the liability side (currency of issuance). Looking at the evidence so far (Figure 2), it appears that despite some loss of popularity since 2015 (we use this year as a frame of reference due to its similarities with current exchange rates), de-dollarisation has not been very active in the last couple of years. Over the same time, the dollar’s role in the debt securities market has even increased.
Overall, the USD presence in various segments has become more even, and its relative dominance versus other currencies has remained, which is especially noticeable in the unchanged share of the USD leg of currency pairs traded on the global OTC market. At this point, it doesn’t seem that the dollar is any immediate danger of losing its status as the primary global currency.
At the same time, however, there are challenges. In this report we will take a closer look at the changing role of US dollar in trade, assets, liabilities, and the FX market turnover, paying close attention to the role of China and Russia.
