Latest data released by the International Monetary Fund (IMF) show: The U.S. dollar’s share of global central bank reserves has continued to decrease, nosediving to 59.2% in the third quarter of 2023. The decline comes amid the de-dollarization trend gaining momentum across the globe.
IMF statistics show: The U.S. dollar’s share is down from roughly 70% in 2000. The dollar remains the world’s leading reserve currency with the euro coming second, while the latter’s share has slid to 19.6%. The Japanese yen’s proportion of world reserves grew to 5.5% from 5.3% in the previous three-month period. The Chinese yuan, British pound, Canadian dollar and Swiss franc were little changed.
The global trend towards using national currencies in trade instead of the U.S. dollar began to gain momentum last year, after Ukraine-related sanctions saw Russia cut off from the Western financial system and its foreign reserves frozen. The European Bank for Reconstruction and Development (EBRD) has warned that Russia’s growing trade in the Chinese yuan as a response to Western sanctions could potentially erode the strength of the U.S. dollar. Economists have been also indicating that Western trade restrictions have led to an increased usage of the Chinese yuan globally at the expense of the greenback.
Eurozone Economy Faces Bleak 2024, Says Financial Times
The 20-nation euro currency bloc is expected to see only moderate economic growth, +0.6% in 2024, according to the results of a survey carried out by the Financial Times among 48 economists.
The outlooks issued by the European Central Bank (ECB) and the International Monetary Fund (IMF) are more optimistic, as analysts from the institutions expect the bloc’s economy to grow 0.8% and 1.2% in 2024, respectively.
The experts polled by the FT said that the Eurozone economy won’t be able to exceed 0.6% growth in spite of the fact that wages are expected to grow faster than inflation. Two thirds of the respondents said that they see the economy in the euro area slip into a recession, commonly defined as two consecutive quarters of GDP contraction. According to the economists, wage growth in the single currency area is set to total only 4% in 2024, while consumer prices are projected to rise by over 2.5% on average next year and slightly below 2.1% in 2025.
The ECB had previously forecast wages and inflation next year to grow 4.6% and 2.7% respectively, which would mark the growth of real household incomes for the first time in three years. The regulator expects consumer prices to grow 2.1% in 2025. Meanwhile, unemployment is projected to rise from a record eurozone low of 6.5% in October to 6.9% at the end of next year, according to most economists polled.
High interest rates, probable energy market turmoil and geopolitical instability are expected to lead to a deeper recession, the economists warned, saying that the potential election of Donald Trump as US president along with the possibility of Ukraine losing the military conflict with Russia could send the single currency bloc into a period of even weaker growth.
Yuan’s Share In Global Payments Rising, Says SWIFT
The Chinese yuan has risen to become the fourth most active currency for global payments by value in November 2023, the latest transaction data compiled by global financial messaging service SWIFT has shown.
According to the report issued this week, the renminbi was used in 4.61% of transactions, climbing from 3.60% in October and overtaking the Japanese yen’s share, which slipped to 3.41% from 3.91%.
Overall, the value of renminbi payments increased by 34.87% compared to October. In annual terms, the yuan’s global share has nearly doubled from November 2022, when it made up 2.37% of payments.
Meanwhile, the share of the world’s other top currencies declined during the month, with that of the US dollar sliding from 47.25% in October to 47.08%. The share of the euro fell from 23.36% to 22.95%, while the UK pound eased to 7.15% from 7.33%.
The growing share of the yuan in cross-border transactions reflects China’s trend of shifting away from the dollar, as well as Beijing’s efforts to promote the use of its national currency, the report said.
Economists point out that China has been pushing for payments in currencies other than dollars in trade with Russia, the Middle East and South America.
“It appears that other emerging countries are also using the yuan when importing Russian crude oil,” chief economist at Dai-ichi Life Research Institute Toru Nishihama was quoted as saying by Nikkei Asia.
Russian businessman Oleg Deripaska said this month that Western sanctions imposed on Moscow have boosted the Chinese currency. According to Deripaska, the volumes of cross-border trade payments in renminbi will exceed those made in euro within just four years.
Since the imposition of sanctions in 2022, Russia and its trading partners among developing nations have intensified efforts to reduce the use of the Western financial system and replace the U.S. dollar and euro with national currencies in trade settlements, including the yuan, Indian rupees and Emirati dirhams.
