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Asia is steadily reducing its dependence on the US dollar, driven by geopolitical uncertainties, shifts in monetary policy, and growing efforts to hedge currency risk. The Association of Southeast Asian Nations (ASEAN) revealed its Economic Community Strategic Plan for 2026–2030, which aims to encourage more trade and investment using local currencies. The plan highlights steps to lessen the impact of exchange-rate swings by promoting settlements in home currencies and by improving payment links across the region. This trend is most visible in Asia, but it extends globally. The dollar’s share of world foreign-exchange reserves has slipped from over 70 percent in 2000 to 57.8 percent in 2024. More strikingly, the dollar experienced a sharp sell-off in April due to uncertainty around US policy moves. Since January, the trade-weighted dollar index has dropped by more than 8 percent. Experts note that de-dollarization is not brand new. What has changed is the growing view that the dollar can be wielded as a tool or even a weapon in trade disputes and sanctions. Mitul Kotecha, Barclays’ head of Asian FX and emerging-market strategy, says this recognition has prompted investors and policymakers to rethink their heavy dollar holdings.  “Countries are looking at the fact that the dollar has been, and can be used as a sort of weapon on trade, direct sanctions, etc. That’s been the real change in the last several months,” he told CNBC. Asian businesses are shifting away from the dollar Asian governments and businesses are now eager to shift more transactions into their own currencies to lower their exposure to dollar swings. Lin Li, who leads global-markets research for Asia at MUFG, explains that de-dollarization in Asia is largely driven by a desire to cut risk by using local money as the main medium of exchange. Bank of America analysts…

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Filed under: News - @ June 11, 2025 9:26 am