Letter: Reducing dollar exposure makes economic sense

Martin Wolf (Opinion, March 30) predicts that a new era of monetary disorder is on the horizon, with no credible alternative to the US dollar as the world’s dominant currency.

But the way the Biden administration has imposed sweeping economic sanctions on Russia would hasten the decision of many non-Western countries to reduce their dependence on the dollar for cross-border trade, investment and finance.

De-dollarization of bilateral trade is already underway, albeit slowly, between the BRICS and several emerging markets. De-dollarization would be given a big boost if Saudi Arabia decides to price some of its oil sales to China in yuan instead of dollars. If that happens, India, Indonesia, Turkey and a host of other emerging economies will be the next to knock on Saudi Arabia’s door and seek similar arrangements in their own currencies. Such measures would also open new opportunities for bilateral trade and investment in local currencies.

Through the frequent and unchecked weaponization of the dollar to advance foreign policy goals, Washington is pushing emerging markets and developing economies to redouble efforts to dedollarize trade, sign bilateral currency swap deals, and diversify investments in alternative currencies.

While moving away from the dollar-centric global financial system will be a long process, it is a cautious one. Beyond geopolitical reasons, reducing dollar exposure also makes economic sense for emerging markets to reduce their financial vulnerability to the vagaries of US monetary policy.

Of course, the transition to a multipolar monetary system will be messy and unlikely to happen overnight, but it’s worth pursuing.

Kavaljit Singh
New Delhi, India

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