Sep 18, 2023
For decades, no global currency has stood a chance of dethroning the U.S. dollar. But a growing coalition of countries is apparently seeking to do just that — and they're already making moves.
The Indian government announced on Aug. 14 that the country’s leading petroleum refiner, Indian Oil Corp., used the local rupee to buy one million barrels of oil from the Abu Dhabi National Oil Company — not the U.S. dollar.
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This monumental transaction follows the sale of 25kg of gold from a UAE gold exporter to a buyer in India for around 128.4 million rupees ($1.54 million), according to Reuters.
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And with the United Arab Emirates being invited to join BRICS, a bloc of the economies of Brazil, Russia, India, China and South Africa, it's possible we'll see more global trades in currencies other than the U.S. dollar.
So, what could this mean for the U.S. dollar's future?
Trade talks
Last year, India’s central bank revealed a new framework for settling global trade in rupees — an idea that came into fruition last month, when India signed two agreements with the UAE.
First, the two giants agreed to settle trade in their local currencies in an effort to cut transaction costs and eliminate dollar conversions. They also agreed to set up a real-time payment link to simplify cross-border money transfers.
The agreements will enable “seamless cross-border transactions and payments, and foster greater economic cooperation,” the Reserve Bank of India explained in a recent statement.
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De-dollarization trend
Powerful nations around the world — particularly China and Russia — are keen to dethrone the U.S. dollar in response to aggressive American sanctions and foreign policy plays.
In August, the BRICS bloc agreed to admit Saudi Arabia, Iran, Ethiopia, Egypt, Argentina and the UAE to its ranks. A common desire among multiple bloc members is to level a global economic playing field they feel is overreliant on the U.S. dollar.
This is part of a larger trend — deemed “de-dollarization” — that has left many questioning whether the dollar’s days of dominance are over. But Treasury Secretary Janet Yellen said no currency currently exists that could displace the greenback.
Yellen’s reassurance follows a 8% decline in the dollar’s share of global reserves in 2022.
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Bethan Moorcraft is a reporter for Moneywise with experience in news editing and business reporting across international markets.
