Over the last few weeks, it has seemed you can’t turn a page, blink at a pixel, or hear a news report without some form of de-dollarization headline shrieking at you. From Brazil to Saudi Arabia, and from India to Argentina, and increasing number of nations are ‘reportedly’ shifting away from the dollar hegemon.
Some recent headlines:
- “No Reason” For Malaysia To Rely On US Dollar, PM Warns As Yuan Influence Grows
- De-Dollarization Just Got Real
- Here Are 7 Signs That Global De-Dollarization Has Just Shifted Into Overdrive
- De-Dollarization Has Begun
Eyeballing the Dollar Index (or some other broad index of fiat relativity) drops modest hints but the nature of the relationship of one un-backed currency against another makes that comparison worthless in the longer-term.
But below the surface, the dollar’s fecal matter is striking rotating objects at an increasing pace and Stephen Jen – infamous for his coining of the ‘dollar smile’ while at Morgan Stanley which posits that the US Dollar tends to do well when the economy is soaring or slumping – recently quantified just how rapidly the de-dollarization is occurring.
Jen, who now runs money at Eurizon SLJ, warned in a recent briefing note, that the dollar is losing its reserve status at a faster pace than generally accepted, as many analysts have failed to account for last year’s frantic swings in exchange rates.
“The dollar suffered a stunning collapse in 2022 in its market share as a reserve currency, presumably due to its muscular use of sanctions,” Jen and his colleague Joana Freire wrote.
“Exceptional actions taken by the US and its allies against Russia have startled large reserve-holding countries,” most of which are emerging economies from the so-called Global South, they said.
As The FT reports, Jen estimates that if you adjust for price changes the dollar’s share of official global reserve currencies has gone from about 73 per cent in 2001 to around 55 per cent in 2021.
Third Seal: Scarcity on Earth
“When He opened the third seal, I heard the third living creature say, “Come and see.” So I looked, and behold, a black horse, and he who sat on it had a pair of scales in his hand.” Rev. 6:5
Then, last year, it fell to 47 percent of total global reserves.
Source: Eurizon SLJ Capita
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