CHICAGO (VINnews) – For decades, the United States dollar has been the dominant currency for international trade, investment, and financial transactions. It has been used as the world’s reserve currency, with other countries holding large amounts of dollars as a store of value. However, recent developments in the global economy have led some to question whether the dollar’s dominance will continue in the future.Join our WhatsApp group
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One of these developments is the increasing use of other currencies, such as the Chinese yuan, in international trade. The yuan has been steadily gaining in importance as China’s economic power grows. In recent years, China has taken steps to promote the use of the yuan in international transactions, including setting up yuan-denominated trading hubs and signing currency swap agreements with other countries.
The recent yuan-settled LNG trade between CNOOC and TotalEnergies is just one example of this trend. The trade, which was conducted through the Shanghai Petroleum and Natural Gas Exchange, marks China’s first yuan-settled LNG transaction. It is a significant milestone for China’s efforts to internationalize the yuan and reduce its reliance on the dollar.
China’s efforts to promote the use of the yuan in international trade are driven by several factors. One is the desire to reduce its exposure to the dollar and the potential risks that come with it. China holds a massive amount of US dollar-denominated debt, and any significant fluctuations in the value of the dollar could have significant consequences for its economy.
Another factor is the desire to increase China’s global influence and challenge the dominance of the United States. The dollar’s dominance has long been seen as a symbol of American power, and reducing its role in international trade could be seen as a blow to US influence.
However, despite these developments, it is still unclear whether the dollar’s dominance will come to an end. The dollar’s strength is still rooted in its widespread use and acceptance, as well as the size and depth of the US economy and financial system. While other currencies, such as the yuan, may gain in importance, it will likely be a slow and gradual process rather than a sudden shift.
Furthermore, the US has taken steps to defend the dollar’s dominance. For example, it has used its economic and political influence to pressure other countries not to use alternative currencies, and it has taken steps to maintain its role as the world’s reserve currency.