The global head of country risk at Fitch Solutions, Cedric Chehab, has explained in an interview with CNBC that the US dollar’s dominance is declining. Fitch Solutions is a provider of financial information services and a division of Fitch Group, which includes Fitch Ratings, a global leader in credit ratings and research. Chehab warned that China’s growing economic power, the de-dollarization efforts by BRICS countries, and the increasing adoption of cryptocurrencies are key factors that are eroding the US dollar’s dominance over time. He added that China will exert more influence in global financial institutions and trade.
Chehab stated that the decline of the US dollar’s dominance will not be a sudden shift, but rather a slow erosion. He identified three main reasons for this decline. Firstly, China’s economic might is continuing to rise, and as the largest trade partner of most economies, it will exert more influence in global financial institutions and trade. Secondly, several economies, such as Russia, are seeking to diversify and delink themselves from the US-led financial sector, and the sanctions imposed by Western countries have accelerated these efforts. Thirdly, central bank digital currencies (CBDCs) and cryptocurrencies are becoming more popular, and they will impact the US dollar as they are used more frequently.
The BRICS bloc, consisting of Brazil, Russia, India, China, and South Africa, is reportedly working to create a new type of currency that will reduce their reliance on the US dollar. ASEAN nations, comprising Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam, are also making similar efforts to reduce their reliance on the US dollar.
Chehab cautioned that CBDCs and cryptocurrencies are less talked about, but they will have a significant impact on the US dollar. He predicted that there will be less use of general currencies, and this will affect the US dollar. The rise of CBDCs and cryptocurrencies will enable countries to have more control over their monetary policies, and this will lead to a decline in the US dollar’s dominance.
In conclusion, Chehab’s warning that the US dollar’s dominance is declining is based on three key factors: China’s growing economic power, the de-dollarization efforts by BRICS countries, and the increasing adoption of cryptocurrencies. The decline of the US dollar’s dominance will be a slow erosion rather than a sudden shift, and it will have significant impacts on the global financial system.
