InvestIdeas

Diminishing the prevalence of non-dollar transactions to reducing dollar holdings in foreign exchange reserves.

South Africa will host the 15th annual BRICS Summit from Aug. 22–24.

Kremlin invested in a SWIFT alternative called the SPFS (System for Transfer of Financial Messages).

China has also put together another SWIFT substitute called the Cross-Border Interbank Payment System (CIPS), which has been steadily growing since 2020. As of February 2023, CIPS has nearly 1,400 participants, processing about $13 trillion.

Brazil and China signed a significant March 29 agreement to ditch the U.S. dollar and settle trade and financial transactions in yuan and reals.

China completed its first purchase of liquefied natural gas (LNG) in the yuan. The transaction between China National Offshore Oil Corp. (CNOOC) and France’s Total Energies involved 65,000 tons of LNG sourced from the United Arab Emirates.

Chinese leader Xi Jinping announced in a December visit to Saudi Arabia that the country would take advantage of the Shanghai Petroleum and Natural Gas Exchange (SHPGX) to settle more oil and gas transactions in the yuan.

Bilateral ruble-yuan trade volumes have skyrocketed, touching as high as $200 billion at the end of 2022.

Cambodia and Iraq have confirmed they plan to conduct more trade in the yuan.

In 2022, central bank gold demand was the highest on record, with these institutions purchasing more than 1,100 tons of gold worth approximately $70 billion.

China acquired 62 tons of gold, raising its total to more than 2,000 tons for the first time. Other central bank buyers were Turkey (148 tons), Egypt (47 tons), Qatar (35 tons), Iraq (34 tons), India (33 tons), the United Arab Emirates (25 tons), and Oman (2 tons).

In January, Beijing’s U.S. debt holdings plunged about 17 percent year-over-year to $859 billion, down from $1.033 trillion,

By one estimate, the dollar is a part of 88% of all international transactions.

“A long-term trend toward diversification of currencies in global financial transactions and trade may develop,” she noted. “But it's a big leap from dollar dominance to dedollarization.”

Central banks have diversified their foreign-currency holdings over the past 20 years, particularly in light of the euro’s introduction in 1999. But the dollar still accounts for 60% of global foreign reserves, not too far down from 20 years ago, when the figure was 67%.

About half of global trade is conducted in dollars. And about half of international loans and debt-securities trading on offshore markets are denominated in dollars.

Also, the greenback is used in 80% of financial-market transactions.

Foreign holdings of U.S. Treasury securities have expanded over the years to $7.4 trillion as of Jan. 31.

Dollar collapse fears are bogus as the greenback can't be replaced anytime soon.

A lot of the talk is often from doomsayers trying to push gold

The dollar "is not only the established choice and, in most cases, the smart choice, but it is the only choice."

Adjusting for exchange rate movements, the dollar has lost about 11% of its market share since 2016 and double that amount since 2008.

Smaller nations are experimenting with de-dollarization while China and India are pushing to internationalize their currencies for trade settlement after the US and Europe cut Russian banks from the global financial messaging system known as SWIFT.

The US currency now represents about 58% of total global official reserves, down from 73% in 2001.