Dollar Dominance Falters as Countries Shun US Financial Power

The dollar's dominance in the global financial system is being challenged as countries become increasingly wary of holding their reserves in US dollars. This trend, known as de-dollarisation, has been gathering momentum for years, but recent events have accelerated it.

In February 2022, Russia discovered that its foreign-exchange reserves were not entirely under its control when the US and its allies froze a large portion of them. This precedent has since been followed by other countries, including China and Saudi Arabia, which are now reducing their exposure to the dollar system.

The US Treasury's Operation Economic Outcast is aimed at cutting Iran's financial connections around the world. Under this plan, entities facilitating Iranian activity risk being removed from the US dollar system. This move has sparked concerns that other countries may soon follow suit and reduce their reliance on the dollar.