De-dollarization: A New Era for Global Trade and Finance

The US dollar's dominance in global trade and finance is being challenged by various factors, leading to a phenomenon known as de-dollarization. According to Luis Oganes, head of Global Macro Research at J.P. Morgan, de-dollarization refers to changes in the structural demand for the dollar that would relate to its status as a reserve currency.

The two main factors threatening the dollar's dominance are an erosion of confidence in the US and the rise of credible alternatives. Increased domestic polarization could jeopardize U.S. governance, which underpins the dollar's role as a global safe haven. Positive developments outside the US, such as economic reform in China, could boost the credibility of competing currencies.

De-dollarization could shift the balance of power among countries and reshape the global economy and markets. The impact would be most acutely felt in the US, where American financial assets would likely underperform versus the rest of the world.