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Russian Tycoon Predicts End of Dollar Dominance Within Five Years

Russian billionaire Oleg Deripaska has predicted that the US dollar will no longer be the dominant global currency within five years. He argues that the dollar has been misused as a tool of retribution against dissenters for too long, often without proper legal scrutiny. Deripaska, the founder of the aluminum giant Rusal, expressed these views in a recent Telegram post, highlighting how the absolute dominance of the dollar in global settlements once seemed unshakeable.

He foresees a future where global settlements become more diversified and digital currencies gain compatibility, leading to a new economic reality that does not rely on a single hegemonic power. This shift is seen as challenging initially but ultimately beneficial for global financial independence.

These comments come in the context of increasing international friction over the use of the dollar in light of U.S. sanctions. Just last week, US Treasury Secretary Janet Yellen acknowledged that the unilateral sanctions might undermine the dollar's global standing, a stark contrast to her statements a year ago, which downplayed any serious competition to the dollar.

Additionally, the impact of Western sanctions on Russia has led to significant difficulties in international settlements for Russia, prompting moves towards alternative currencies and the creation of a special department by the Central Bank of Russia to handle international settlement issues amid sanctions. These developments underline the growing trend of de-dollarization in response to geopolitical tensions. Deripaska himself has been directly affected by U.S. sanctions, which forced him out as CEO of Rusal and targeted the company's aluminum exports. Read More.

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Yuan Surpasses Dollar in Chinese Cross-Border Transactions for the First Time

For the first time, the Chinese yuan has surpassed the US dollar as the most utilized currency in China's cross-border transactions. As of the end of March, the yuan accounted for 48.4% of these transactions, overtaking the dollar's 46.7%. This shift reflects a significant change from 2010, when the yuan's share was nearly nonexistent and the dollar dominated at 83%, based on Bloomberg data.

This change is part of China's broader strategy to enhance the yuan's role in international trade and finance, bolstered by recent increases in Chinese bond inflows and investments into Hong Kong stocks. The Chinese government, recognizing the potential to minimize currency mismatch risks, is actively promoting the yuan for more extensive international use.

Despite these advances within its borders, the yuan's global footprint remains small in comparison to the dollar. For instance, the yuan's involvement in global trade finance transactions was just 4.5% in March, significantly lower than the dollar's 83.7%.

The move towards de-dollarization gained momentum after Western sanctions against Russia demonstrated the risks associated with relying heavily on the dollar. Following these developments, China has pursued non-dollar-based trade agreements, notably with Brazil and Russia, where the yuan has become the most traded currency post-sanctions.

However, despite these inroads, analysts believe the dollar will maintain its global dominance for the foreseeable future, partly because the yuan is still tightly controlled by the Chinese government. Read More.