‘A natural way to diversify': Janet Yellen now says Americans should expect a de...

Janet Yellen now says Americans should expect a decline in the USD as the world's reserve currency — what’s really going on and how can you prepare?

‘A natural way to diversify': Janet Yellen now says Americans should expect a decline in the USD as the world's reserve currency — what’s really going on and how can you prepare?

Bethan Moorcraft

Thu, June 15, 2023, 9:55 PM GMT+9·6 min read

The U.S. dollar saw an 8% decline in its share of global reserves in 2022 — causing some to question whether the dollar’s days of dominance are over.

Treasury Secretary Jannet Yellen gave her two cents on the matter of so-called “de-dollarization” during a congressional hearing on Tuesday — stating that no currency currently exists that could displace the greenback.

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While U.S. sanctions and foreign policy plays have inspired a backlash from China, Russia and other prominent countries — who are keen to dethrone the dollar — Yellen remains adamant that “it will not be easy for any country to devise a way to get around the dollar.”

She did, however, warn that the dollar’s share of global reserves may continue to decline as countries look to “diversify.”

Here’s why the topic of de-dollarization is front and center today — and what you can do if you’re worried about the strength of the dollar.

Impact of U.S. sanctions

The dollar’s dominance in global trade and capital flows dates back at least 80 years — not just because the U.S. is the world’s largest economy, but also because oil and other essential commodities are priced in the greenback.

However, recent events — including the Fed’s aggressive rate hikes to stem domestic inflation, the trade war with China and the U.S. sanctions enforced after Russia’s invasion of Ukraine — have caused more countries to call for trade to be carried out in other currencies besides the U.S. dollar.

At the 14th BRICS Summit last year, Russian President Vladimir Putin announced measures to create a new “international currency standard.” Meanwhile, China has been urging oil producers and major exporters to accept yuan for payments, and major oil exporter Saudi Arabia has said it’s “open” to the idea of trading other currencies.