A global backlash against the US dollar’s dominance is taking shape. In a recent deal, Brazil and China agreed to settle trade in their local currencies, bypassing the greenback. 

India and Malaysia signed an accord in April to increase the usage of the rupee in cross-border business. France, a long-standing ally of the US, is also completing transactions in yuan.

Experts view this wave of agreements as meaningful action lacking in the past. Many leaders cite the weaponization of the dollar, using it to advance American foreign-policy goals and punish dissenting nations, as the reason behind their measures.

The US’s financial pressure on Russia following the invasion of Ukraine serves as a vivid example of the dollar’s use as a weapon. 

China plays a significant role in shifting away from the dollar as President Xi Jinping seeks a larger role for the yuan in the global financial system. However, much of the movement is happening without China’s direct involvement.

India and Malaysia, not strategic allies of China, have established mechanisms to conduct bilateral trade in rupees. 

The Association of Southeast Asian Nations has agreed to enhance the use of member currencies for regional trade and investment. South Korea and Indonesia have recently signed an agreement to promote direct exchanges of the won and rupiah.

Brazilian President Luiz Inacio Lula da Silva criticized the dollar’s dominance during his visit to Shanghai in April. He called on the largest developing economies, including Brazil, Russia, India, China, and South Africa, to find an alternative to replace the greenback in foreign trade.

The dollar’s centrality in the global payments system gives the US unique economic influence over other nations. Around 88% of global foreign-exchange transactions, even those not involving the US, are in dollars. This reliance makes banks vulnerable to US sanctions since they maintain accounts at the Federal Reserve.

While the de-dollarization movement is gaining momentum, market observers believe that the dollar’s position in global trade and finance will remain unthreatened for the foreseeable future. The dollar’s stability, liquidity, and safety are unmatched, and advanced-economy allies of the US show little urgency in shifting away from the greenback.

Despite the push for de-dollarization, the dollar has actually strengthened against major currencies since the US intensified sanctions against Russia. 

Developing nations continue to join the de-dollarization movement. Pakistan is exploring the possibility of paying for Russian crude imports in yuan, while the United Arab Emirates is discussing ways to enhance non-oil commerce in rupees with India.

The BRICS nations have requested guidance from their bank on the potential creation of a shared currency to shield member countries from the impact of sanctions.

The shift away from the dollar is expected to accelerate in the coming years, and the long-term consequences of the US’s calculated use of the dollar to inflict pain are yet to be fully realized.