Weakened Global Position of the US Dollar:
The global communication media have recently highlighted that within the last 15 months, the US dollar has become the weakest it has been in the past two decades.
According to Reuters, the US dollar has weakened by 13% compared to other major currencies in the basket system.
However, the internal factors of the US economy are seen as the main reason for this, rather than international factors.
The increase in interest rates in the US has reduced the demand for loans, and the inability of American companies to distribute sufficient profits and dividends due to lack of profits has weakened the attraction of the dollar.
According to a survey conducted by the Visa Investment Group, about 50% of the income of 1,000 American companies in international markets has been lost.
The weakening demand and value of the dollar in the international market will benefit weak, underdeveloped, and developing countries.
They will be able to spend more dollars to purchase goods and services and import them with their existing funds.
Another reason for the weakening of the dollar is that countries like India, China, and Russia are making efforts to establish their own currencies for international trade and payments.
About six months ago, Russia announced that it will reject the use of the US dollar in international payment systems.
India has also reached an agreement with the UAE to conduct crude oil payments in Indian rupees. For this, the UAE had set conditions with India for gold trade.
China has inspired brisk nations to reject the dollar system for international trade, payments, and loans.
In the upcoming week (August 23-24), the Brisk Summit is scheduled in South Africa.
According to the South China Morning Post, Chinese President Xi Jinping will propose ending the role of the dollar in the brisk system. Brazil, Russia, India, China, and South Africa are the main countries within the brisk nations.
These five countries account for 41.9% of the world’s population and nearly a third of the economy.
If China’s proposal is accepted, the US dollar will be significantly weakened within the brisk system.
Some have termed this as ‘China’s De-dollarization Effort.’
While the success of this effort is uncertain, it is still unclear. Beijing had previously accused Washington of making preparations from a long time ago to establish the dominance of the dollar.
Some have speculated about introducing brisk currencies like the Euro, but such a proposal has not yet been formalized.
Analysts believe that China will not implement the ‘De-dollarization’ policy from a geopolitical perspective. This policy should also be analyzed from an economic and monetary perspective.
However, China, Russia, and Brazil seem to be nearly unanimous in their approach to this policy.
It is not yet clear what role India and South Africa will play in this matter, but their stance is still uncertain.
China’s geopolitical rivalry and increasing cooperation and dependence on the US make it difficult for India to accept China’s proposal.
India may take the path to increase the international acceptability of the Indian rupee, thereby dealing a blow to the US dollar. Regardless of the reasons, all of this will exert pressure on the US dollar.
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