Indonesia Leads De-Dollarization Movements
Author: Gabriel GrayThe Bank of Indonesia is taking a more concrete approach to de-dollarization by implementing a Local Currency Trade (LCT) system, which is considered more direct than the BRICS approach. This system has already been put in place with several countries such as Thailand, Malaysia, China and Japan, while an agreement to begin bilateral transactions with South Korea on further de-dollarization is expected to be declared in early May.
Despite the U.S. Treasury Secretary Janet Yellen's acknowledgement that economic sanctions used against certain countries by the U.S. are putting the dollar's sway at risk, governments across the world still feel the need to reduce their reliance on the currency. This is because of the advantages of trading in the most powerful currency – lower lending costs and a broader range of trading partners. However, the move to the United States' competitors and increasingly accepted local currencies, such as the euro and the yuan, still continues.
It is clear that, due to the numerous benefits of trading in US dollar, many countries are still opting out of de-dollarization; however, the rise of regional currencies, such as the yuan, is slowly challenging the greenback’s dominance and could eventually irreversibly affect the US dollar's preeminence. Therefore, it is apparent that the world is gradually moving away from a dollar-based economic order, with countries such as Indonesia leading the way.