New Delhi: The US–Israel and Iran war has resulted in a sharp surge in demand for the US dollar. Because of the war, the Rupee has reached 94.05 against US Dollar. In fact, USD is the world’s primary reserve and trading currency due to its high stability, wide acceptance. The US Dollar is used in 85 per cent of the global trade, such as oil and gold. However, there are some countries in the world which do not use the dollar or are gradually distancing themselves from it.
What is de-dollarization?
The US dollar is the most powerful currency in the world, but many countries are traying to reduce its dominance. This process is called de-dollarization. Some countries are reducing its share in their trade, payments, and foreign exchange reserves to weaken the US currency. According to a report by EBC Financial Group, this trend is growing rapidly, with countries decreasing dependence on the dollar and increasing the use of other currencies.
According to the report, some countries have openly distanced themselves from the US dollar. Countries like North Korea, Iran, and Cuba no longer use the US dollar. These countries are already under US sanctions, which is also a reason that these nations have structured their economic systems independently of the dollar.
Why nations are seek alternatives to US Dollar
Some major world powers, such as Russia is trying to reduce dependency on the dollar and increase trade with China in Yuan and Rubles. With an aim to strengthen its yuan, China is trying to make direct deals at the international level with its own currency. India has also started some trade in Rupees with countries including Russia and the UAE.
Many countries are also reducing their share of the dollar in their foreign exchange reserves. Central banks are now including currencies, such as euro, yuan, and gold in their reserves. According to IMF data, the share of the dollar in global reserves has declined compared to earlier.
The strict policies and economic sanctions of the United States have forced countries to distance from the US Dollar. Also, nations want to reduce their economic risk. If there is complete dependence on a single currency, it can lead to major losses during times of crisis.