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Members’ question time: Is this the end of dollar dominance?

Calls for an alternative to the dollar as the global reserve currency of choice have increased in recent years. US sanctions against Russia following its invasion of Ukraine reaffirmed how the dollar can be weaponized. Efforts to cut Russia out of global payment systems and curtail access to the dollar follows similar action against others including Iran, North Korea and Venezuela, to name a few. Although not paralysed, the Russian economy has been destabilized and weakened in the long run. This, alongside the freezing of Russian access to $300 billion in foreign exchange reserves, has incentivized some governments into searching for ways to escape dollar dominance. This will be a significant challenge. Despite a decline, the dollar and dollar payment systems remain overwhelmingly dominant. Whilst many forecasts predict its decline, the dollar's share of the global forex reserve sits at around 60%, down from 72% in 2000. The renminbi, meanwhile, has gone from zero to 2.6% over the same period. As of 2022, the dollar was used in 88% of all international transactions. Ever expanding US firms (notably big tech), the strength of Wall Street and confidence in the Federal Reserve all compound international reliance on the dollar. This helps the US sustain large current account deficits and lowers US corporations’ cost of foreign direct investment (FDI), fuelling their expansion around the world and continuing the cycle. This event discusses: Can countries realistically escape the dollar? How does weaponization and the use of sanctions undermine confidence in the dollar? What are the alternatives to the dollar? Does the dollar’s strength mirror broader American power in global affairs? What could a more polycentric global financial system mean for the dollar? Join us as our senior research fellow in the Global Economy and Finance Programme answers your questions in this quick-fire, informative session.