De-dollarization now on the agenda Yellen, Lagarde and markets – 04/18/2023 – Nelson de Sá

On CNN, host Fareed Zakaria asked the US Treasury Secretary:

“The use of the dollar as a weapon produced a reaction. Lula asked why we are all being forced to use the dollar. Macron referred to the same way. There is a danger that in the future we will look at all these sanctions and say: ‘This was the moment when that dollar hegemony has begun to falter’?”

Janet Yellen’s response:

“There is a risk, when we use financial sanctions that are linked to the dollar’s role, that over time it could undermine the dollar’s hegemony. Of course it creates a will to find an alternative, but the dollar is used as a global currency for reasons that It’s not easy to find an alternative.”

In the Financial Times, the president of the European Central Bank said that, “if global value chains fragment along geopolitical lines, some countries could reduce their dependence on the dollar and the euro”.

It cited the “anecdotal” increase in the use of the Chinese renminbi and Indian rupee in trade and larger gold stocks being used as an alternative reserve asset. He added:

“As developing countries trade more with China, which has become the world’s biggest exporter, they tend to increase their renminbi reserves. So far, the data do not show substantial changes in the use of international currencies, but they suggest that the status of an international currency should no longer be taken for granted.”

INDIA & RUSSIA

On Reuters, “India, Russia negotiate free trade deal in stepping up relations”.

“We believe it will make a real difference to our business relationship,” says Indian Foreign Minister S. Jaishankar. According to him, Indian companies will benefit from Russian technology and New Delhi “is working to solve payment problems”.

BET AGAINST THE DOLLAR

On Bloomberg, “The dollar king hasn’t been dethroned yet, but now there’s a deal to be done.”

Explains the head of portfolio management at Lumen Capital, from Singapore: “Dedollarization is a long-term game, but if you want to position yourself for the next three to five years, it is structurally positive for the local currency in emerging markets , mainly in the fixed income asset class”.

IN A WORLDWIDE IDEAL POINT

robin brooks“o bald”, chief economist at the Institute of International Finance, former Goldman Sachs and IMF, was in Brazil and comments on “the biggest trade surplus in history”:

“Brazil’s balance of payments fundamentally changed, to a very good place. There is nothing ‘normal’ about March’s surplus, which is huge compared to the same month in previous years. Brazil’s status as a commodity exporter places it in a global sweet spot.”

He projects that the dollar will drop to R$4.50.

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