The Dollar Is Facing an End to Its Dominance

"2026 will be the year when US dollar dilution-the quiet erosion of its global dominance as countries trade and pay in alternatives-starts to build momentum. The more Washington uses the dollar as a weapon, the more the world builds ways to circumvent it. America's share of global trade has fallen from one-third in 2000 to just one-quarter today. As emerging economies trade more with each other, the dollar is less central to the flow of goods."

"At the same time, central banks around the world are starting to accumulate currencies other than the dollar as reserves. The dollar made up 72 percent of global reserves in 1999. Today, it's down to 58 percent-and falling. A currency is safe only if it's perceived to be safe. But perceptions are shifting. Ballooning US fiscal deficits-projected at $1.9 trillion in 2025-together with a widening current-account gap, estimated at 6 percent of GDP, are adding pressure to the dollar."

2026 will mark growing momentum in US dollar dilution as countries increasingly trade and pay in alternative currencies and systems. Emerging economies are settling trade in rupees, dirhams, and yuan, while over half of China's trade now uses CIPS instead of SWIFT. Bilateral and regional partnerships such as Brazil-Argentina, UAE-India, and Indonesia-Malaysia are piloting local currency settlements. Central banks are accumulating non-dollar reserves, with the dollar's share falling from 72 percent in 1999 to 58 percent today. Large US fiscal deficits, widening current-account gaps, and extensive money creation are increasing pressure on global confidence in the dollar.

Read at WIRED