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De-Dollarisation Clashes With India-China Border Dispute

The global de-dollarisation trend is not totally a bed of roses, or at least there are thorns in the roses that have to be taken into account. While de-dollarisation seems to be an irreversible trend on the global scale, at regional levels it is running into bilateral or regional political tensions. In this regard, one of the most prominent cases is in Asia: the India-China border dispute. In April 2023, the Chinese national currency, yuan, ranked third in international trade settlements made through the US-dominated SWIFT system. According to data from the system itself, yuan’s share in April was “record high,” although that share was only 4.72%, after euro’s 6.54%.

Chinese Currency Displaces Euro In Brazil’s Foreign Reserves

The Chinese currency, referred to as the yuan, surpassed the euro and became the second most important currency of Brazil’s foreign reserves in 2022, according to a report published this Friday by the Central Bank of the South American country. Until 2019, the yuan was virtually absent from Brazil’s foreign exchange reserves. However, by the end of 2022, the Chinese currency came to represent 5.37% of the holdings of the Brazilian Central Bank, surpassing the 4.74% share of the euro. In 2021 the share of the yuan constituted 4.99% and that of the euro 5.04%. Meanwhile, the US dollar continues to dominate, holding 80.42% of total foreign exchange reserves in Brazil’s Central Bank, which is currently being questioned by President Luiz Inácio Lula da Silva.

Russia Dropping US Dollar For Chinese Yuan – And Fast

Russia has spent years trying to decrease its dependency on the US dollar. But especially since the escalation of the proxy war in Ukraine in 2022, Moscow has accelerated its drive toward de-dollarization. Western sanctions have locked Russia out of the US-dominated international financial architecture. Numerous Russian banks were disconnected from the SWIFT inter-bank messaging system. Washington and Brussels even froze a staggering $300 billion of the Russian central bank’s foreign exchange reserves. In response, Russia’s central bank has largely abandoned the US dollar and euro, and instead it plans to buy Chinese yuan on the currency market. In the span of less than a year, the yuan has quickly replaced the dollar as the most sought foreign currency in Moscow.
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