Commentary

US Dollar to Remain Dominant Despite RMB Internationalization

U.S. Dollar to Remain Dominant Despite RMB Internationalization

In recent months, a growing chorus of analysts has argued that the U.S. dollar’s dominance is waning, with China’s renminbi (RMB) emerging as the leading replacement.

Other analysts, however, take a more circumspect view. They concede that some countries are moving to use currencies other than the USD for trade and reserves purposes, but doubt that the RMB will systemically replace the dollar anytime in the foreseeable future. The Asia Group assesses that most evidence supports this view.

China and Russia are clearly motivated to ramp up RMB use to settle trade transactions because of the U.S.-led sanctions against Moscow. Those sanctions have frozen much of Russia’s foreign currency reserves and removed major Russian banks from SWIFT, which facilitates most international banking transactions.

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