Moody's Says Multi-Polarisation Currency System Will Occur, But US Dollar Can Still Maintain Its Dominance

De-dollarization has become a trend at the moment, and countries around the world are looking for alternatives to the US dollar. And for those concerned that the dollar may lose its dominance in international trade and finance, Moody's Investors Service has a message: Despite the challenges, the greenback is likely to retain its dominance.

"We expect a more polarized monetary system to emerge over the next few decades, but it will be dominated by the dollar as challengers will struggle to fully replicate the dollar's size, safety and convertibility." Moody's analysts wrote in a recent report.

But that's not to say Moody's sees no risk to the dollar in the short term.

In addition, some international policies of the United States, especially sanctions, further inhibit the free flow of US dollars in global trade and finance, and the final result may encourage other countries to achieve greater diversification of currency reserves or settlements.

The dollar's share of international foreign exchange reserves fell to a 20-year low of 58% in the fourth quarter of 2022, down from about 78% at the turn of the last century, according to the International Monetary Fund.

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