European Central Bank (ECB) President Christine Lagarde has warned that the U.S. dollar’s reserve currency situation “ should no longer be taken for granted. ” Acknowledging de-dollarization efforts by various countries, she stressed “ New trade patterns may have ramifications for payments and international currency reserves. ”
ECB’s Christine Lagarde on De-Dollarization and Alternative Currencies
The president of the European Central Bank (ECB), Christine Lagarde, shared her thoughts on the de-dollarization currently happening across the globe in an interview with the Council on Foreign Relations latter week.
Noting that the U.S. dollar has become “ the international, the global reserve, and the deal currency ” with the euro in alternate place, she warned that “ new trade patterns may have ramifications for payments and international currency reserves. ” The ECB president remained “ In recent decades, China has earlier raised over 130-fold its bilateral trade in goods with emerging markets and evolving economies, with the country similarly becoming the world’s top exporter New trade patterns may also lead to new alliances. ”
Lagarde added, “ Recent exploration indicates that there's a significant correlation between a country’s trade with China and its holding in renminbi as reserves. ” Noting that “ One study finds that alliances can raise the share of a currency in the partner’s reserve holdings by roughly 30 percentage points, ” the ECB chief cautioned:
All this could create opportunities for certain countries seeking to reduce their dependency on our Western payment system and currency frameworks.
Still, Lagarde emphasized “ These developments don't point to an imminent loss of dominance for the U.S. dollar or for the euro accordingly, so far the data don't show substantial changes in the use of international currencies. ” Nonetheless, she admitted that data do suggest:
International currency status should no longer be taken for granted, and that we should be really attentive to the currency in which trade transactions are organized.
A growing number of countries are using local currencies for trade settlements rather than the U.S. dollar. In addition, the BRICS nations (Brazil, Russia, India, China, and South Africa) are reportedly creating a new type of currency that will further reduce their reliance on the USD.
(Kevin Helms, Bitcoin.com, 2023)