Rivalry with China, its consequences war in Ukraine and the political theater around the borrowing limit on USA shake his world domination dollar.

In accordance with IMF, in the last quarter of 2022, the dollar’s share of global foreign exchange reserves fell to its lowest level in 20 years. According to Stephen Jenn, this is a reaction to Russia’s $640 billion reserve freeze, which prompted countries such as Saudi Arabia, China, India and Turkey to change the composition of their reserves.

The share of the yuan in foreign exchange markets has risen from almost zero 15 years ago to 7%.

The mighty dollar dominates commodity markets, so Washington has the ability to block producing countries such as Russia, Venezuela and Iran. But this is changing. India buys Russian oil, paying in Emirati dirhams and rubles. China pays Russia in yuan for oil, coal and metals, and France’s Total Energies pays in yuan for LNG bought from China’s CNOOC. Meanwhile, according to the Bank for International Settlements (BIS), the share of the yuan in foreign exchange markets has risen from almost zero 15 years ago to 7 percent. The abandonment of the dollar suggests that exporting and importing businesses, currency traders, debt issuers and financial institutions will voluntarily decide to use other currencies. This is pretty unlikely.

According to the BIS, the dollar accounts for almost 90% of the world’s transactions in the foreign exchange markets, about 6.6 trillion. dollars in 2022. About 50% of the world’s external debt, 59.5% of the world’s foreign exchange reserves and 50% of international trade payments are denominated in dollars. And, as Barry Eichengreen, a professor of economics and political science at the University of Berkeley, points out, “there is no mechanism that would force banks, businesses, and governments to change their behavior at the same time.” It is true that no currency is a candidate to replace the dollar, but there are many alternatives that could potentially create a multipolar world.

According to Jeffrey Wu, an analyst at BNY Mellon, many countries are realizing that when their foreign exchange reserves are dominated by one or two currencies, they “lack diversity.” Many central banks are trying to diversify their holdings by buying corporate bonds, real estate and other currencies. “The process is ongoing,” said Mark Tinker, general manager of Hong Kong-based Toscafund, who expects “the dollar will be less used in the global system from now on.”