The dominance of the US dollar in international trade could weaken further due to the financial sanctions slapped on Russia amid its ongoing conflict with Ukraine.
- IMF First Deputy Managing Director Gita Gopinath said the sanctions that western countries imposed on Russia could bring about the establishment of small currency blocs, dependent on trade between country groups.
- Gopinath said the greenback would continue to be the top global currency, but “fragmentation” is still possible at a smaller level, which is already being seen in several nationals renegotiating trading currency.
- Gopinath believes that the diversification of currencies in global trade would also drive the further variety in the reserve assets kept in central banks, as countries usually keep reserves in currencies they trade with the most.
- International reserves have continued to be dominated by the dollar, but its share has fallen to 60% from 70% in the last two decades as other trading currencies such as the Australian dollar and the Chinese renminbi have gained traction.
DXY is up 0.32%.
Source: Financial Times