Myth or Reality
Dedollarisation: Noise, Narrative or Structural Shift?
Markets, Rates & Risk – Inaugural Edition
Dedollarisation: Noise, Narrative or Structural Shift?
Over the last few months, I’ve noticed something interesting.
Every time there is a geopolitical tension, a sanctions announcement, or a policy shift in the US, a trade block meets for their meeting, and one phrase comes back into discussion — “de-dollarisation”.
The idea sounds straightforward and romantic.
Some central banks are diversifying their reserves composition.
There is lot of noise and we will have think about with lot of cool head and rational thinking without getting involved in media’s biased journalism .
Because a reserve currency is not a headline. It is an ecosystem.
What actually makes a currency “global”?
A currency does not become central to the world economy only because of the size of the country behind it.
It becomes central because:
- Its financial markets are deep enough to absorb global capital.
- Foreign investors can enter and exit freely.
- Contracts are enforceable.
- Policy changes are predictable enough for long-term commitments.
- It is widely used in trade invoicing and settlement.
- There is trust that access to the system will not be arbitrarily withdrawn.
In other words, it is not just about GDP.
It is about openness, liquidity and credibility.
Well , that’s tough test .
The China Question
Whenever the discussion moves to de-dollarisation, China is always occupies centre stage .
China’s economic rise is undeniable. Its role in global manufacturing, supply chains and trade is significant. Naturally, the question follows — does that automatically translate into the renminbi becoming a global reserve currency?
Not necessarily.
A reserve currency needs to be freely usable. That means capital should be able to move in and out without restrictions. Financial markets must be open and transparent. Foreign investors must feel confident about legal recourse and policy continuity.
At least right now , China is yet to establish its readiness and willingness to satisfy these parameters.
You cannot be the world’s banker if the world cannot move money in and out comfortably.
Where the real risk lies
Dollar is unlikely to weaken because another country announces ambition.
It is more likely to happen if the US itself changes behaviour in ways that affect trust and openness.
For decades, the dollar has been supported by:
- Open capital markets
- Willingness to run trade deficits
- Deep government and corporate bond markets
- Institutional stability
- Legal certainty
If trade becomes increasingly restricted, if access to the financial system is seen as politically contingent, or if unpredictability becomes the norm, countries will gradually look for insurance.
Reserve currency status rarely collapses suddenly.
It erodes slowly — if confidence erodes.
What does this mean for Indian businesses?
From a business perspective, it is important not to get carried away by narratives.
Business has to look at things at multiple aspects before it decided in which it should invoice its exporters. Again this is strategy decision and not to be taken emotionally. We need to see both what’s profitable for me for now and at the same time without losing our eyesight on longer term horizon.
In other words, we can just change our invoicing currency looking at some announcements by country wherein billing in respective local currencies is now permitted between two countries.
Instead of debating whether the dollar will fall, better questions are:
- Is our hedging policy clear and documented?
- Do we understand our natural hedges?
- How sensitive is our cost structure to exchange rate movement?
Macro debates are interesting. But Treasury discipline is essential.
My closing view
In global finance, change happens.
But it happens slower than headlines suggest.
This blog — Markets, Rates & Risk — will look at such themes through a practical lens.
Not from a trading desk.
Not from a political angle.
But from the standpoint of business stability.
— Anupam
Markets, Rates and Risk 
Leave a comment