JPMorgan says signs of de-dollarisation are unfolding in global economy

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5th June 2023 – (Hong Kong) JPMorgan, the largest bank in the U.S., has stated that signs of de-dollarisation are unfolding in the global economy, but the currency is expected to maintain its long-held dominance for the foreseeable future. Steep U.S. interest rate rises and the use of sanctions that have frozen countries like Russia out of the global banking system are driving the BRICs nations (Brazil, Russia, India, China, and South Africa) to challenge the dollar’s hegemony.

JPMorgan’s strategists Meera Chandan and Octavia Popescu at the Wall Street bank have reported that while overall dollar usage remains within its historical range, its usage is more “bifurcated under the hood.” The dollar’s share of traded currency volumes is just shy of record highs, at 88 per cent, while the euro’s share has shrunk by 8 percentage points over the last decade to a record low of 31 per cent. The share of the Chinese yuan has risen to a record high of 7 per cent.

JPMorgan has estimated that for global exports, the U.S.’s share has dropped to a record low of 9 per cent, while China’s share is at a record high of 13 per cent. In global central bank FX reserves, the dollar’s share is down to a record low of 58 per cent, but it is still the largest globally.

However, JPMorgan’s note on Monday also stated that progress in internationalising the yuan has been limited and is unlikely to change much given the country’s capital controls. The “CNY” is 2.3 per cent of SWIFT payments, versus 43 per cent for the dollar and 32 per cent for the euro.

JPMorgan’s assessment is the most high-profile of any large U.S. bank, although heavyweight asset managers such as Goldman Sachs Asset Management have also voiced views on the trend.