JPMorgan sees risks to US dollar global positions

JPMorgan is concerned that the dollar may lose its standing in the international arena.

A decrease in confidence in the dollar may lead to de-dollarization.

In 2022, the US dollar's share of global foreign exchange reserves has seen a sharp decline.

Over the next decade to two decades, the dominance of the US dollar will slowly diminish.

JPMorgan bank predicts that the US dollar's supremacy may soon be seen to be waning, which could result in a partial de-dollarization of the global economy. This could be hastened by a decrease in trust in the dollar or by occurrences that increase trust in other currencies.

The International Monetary Fund (IMF) reported that the percentage of the US dollar in foreign exchange reserves dropped from 73% in 2001 to 58% in 2022. Simultaneously, the share of the Chinese yuan increased by approximately 2.5% over the same period.

Although China is the only country attempting to diminish the dollar's and US economy's influence in the long run, JPMorgan does not believe that the dollar is in danger of being supplanted by the yuan.

Urizon Capital, a British investment company, has reported that the US dollar's share of global foreign exchange reserves is projected to decline 10 times faster than the average rate over the past two decades by 2022.

Urizon Capital estimates that, taking into account exchange rate fluctuations, the dollar has dropped 11% of its share in the global foreign exchange market since 2016, and its share in the global economy is still decreasing steadily.

Urizon suggested that sanctions preventing Russia from using the dollar could have the unintended consequence of weakening the dollar's status as a reserve currency, and thus benefit China. He proposed that a "tripolar" currency system could emerge, in which the dollar, yuan, and euro would all be used in international transactions.

The American Conservative writes that the United States has shaken the dollar's hegemony by imposing sanctions on Russia, demonstrating the risks of relying on the American currency. Over the next 10-20 years, the dollar's dominance will gradually diminish, and it will become one of many major currencies in global trade.

Many countries have expressed interest in joining the BRICS, indicating their wish to break away from the dollar's hegemony and US economic instruments such as sanctions, according to Newsweek. At the BRICS summit in August, the countries will be discussing the possibility of creating a unified currency.