Cedric Chehab, Global Head of Country Risk at Fitch Solutions, told CNBC that the US dollar's dominance is being eroded by three key factors: China's growing economic might, the de-dollarization efforts by BRICS and ASEAN nations, and the rise of central bank digital currencies (CBDCs) and cryptocurrencies. He emphasized that the shift would be a slow erosion rather than a sudden paradigm shift.
China's Rising Influence
Chehab noted that China is already the largest trading partner for most economies, and as its economic power continues to ascend, it will exert greater influence in global financial institutions and trade. This trend encourages other countries to diversify their settlement and reserve currencies, gradually reducing reliance on the US dollar.
BRICS and ASEAN De-Dollarization Push
The analyst highlighted that countries such as Russia are accelerating their delinking from the US-led financial system due to Western sanctions. The BRICS bloc (Brazil, Russia, India, China, South Africa) is reportedly working on a new currency to reduce dependence on the US dollar. Meanwhile, the ASEAN nations (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam) are also pursuing similar diversification strategies. Chehab stressed that these efforts, while gradual, are building a clear long-term trend.
CBDCs and Cryptocurrencies
Chehab pointed to CBDCs and cryptocurrencies as a 'less talked about' but equally important factor. He warned that the proliferation of digital yuan, digital ruble, and global crypto adoption like Bitcoin and Ethereum could lead to reduced usage of traditional currencies, including the US dollar. 'We'll essentially see, perhaps, less use of general currencies. That will impact the US dollar,' he cautioned.
Chehab's analysis aligns with recent trends of central banks increasing gold reserves and expanding bilateral swap agreements, all pointing to a slow but steady erosion of the dollar's dominance.