US dollar: ‘Wounded hegemon’ or secure as most powerful currency on earth?

Johannesburg, South Africa – On a precocious November greeting – 2 days earlier leaders of the world’s starring economies convened successful Johannesburg for the 2025 Group of 20 acme – the governors of the South African and Chinese cardinal banks met conscionable 20 minutes distant to inaugurate a strategy that galore anticipation tin assistance determination planetary commercialized retired of the shadiness of dollar dominance.

At a ceremonial astatine the South African Reserve Bank successful Pretoria that day, Standard Bank – Africa’s largest by assets – became the archetypal connected the continent to nexus straight into China’s Cross-Border Interbank Payment System (CIPS). This integration means African businesses tin present settee payments with China straight successful renminbi without the usage of immoderate intermediary currency – notably the United States dollar (USD).

The USD has been the world’s main reserve currency since the extremity of World War II, and is utilized successful much than 80 percent of planetary commercialized today.

But successful caller years, speech of alternatives to the greenback has been gaining traction, peculiarly successful the Global South, and spearheaded by the BRICS radical of processing economies, of which South Africa is simply a part, on with Brazil, Russia, India and China arsenic the founding members. Egypt, Ethiopia, Indonesia, Iran and the United Arab Emirates person besides joined successful caller years.

Like South Africa, Brazil has besides integrated into CIPS. At the aforesaid time, it has progressively been utilizing the existent and the yuan to settee bilateral commercialized with China, specified arsenic successful the merchantability of soya beans, bypassing the USD.

Other countries person besides been leaning into the usage of section currencies. India and the UAE person traded successful rupee and dirham, portion China and the UAE person settled liquefied earthy state (LNG) commercialized successful yuan. China has traded with others, including Argentina, Iraq and Saudi Arabia, utilizing the yuan. And China and Russia person sharply shifted their bilateral commercialized colony into section currencies, partially arsenic a workaround to bypass Western sanctions. China’s lipid commercialized with Iran and Russia has chiefly been settled successful renminbi. India and Russia person accrued the usage of roubles and rupees for their bilateral trade.

As a group, BRICS is besides pushing up with its Bridge integer currency that, if successful, would let them to commercialized bypassing some the USD and the Society for Worldwide Interbank Financial Telecommunication (SWIFT) – a messaging web banks usage to facilitate planetary payments, which is heavy influenced by US and European Union regulations. Although the Bridge strategy is not yet active, a moving exemplary is expected to beryllium presented during this year’s BRICS acme successful India.

For analysts, bilateral commercialized allowing countries to acceptable their ain presumption has ever been portion of planetary economics. So specified endeavours are not caller oregon unexpected.

However, they are expanding successful frequence arsenic determination is much inducement to determination distant from sole dependence connected the USD, accidental analysts.

A currency speech relation counts US dollars successful Abuja, Nigeria [File: Afolabi Sotunde/Reuters]

While the US, arsenic the world’s starring economy, has historically dominated planetary trade, that power has waned implicit the past decade, with China taking the lead, particularly successful the Global South, which accounts for 85 percent of the world’s colonisation and astir 50 percent of planetary gross home merchandise (GDP).

In Africa, for example, China was the root of astir of the continent’s imports successful 2024, followed by the EU, India and the US, according to the United Nations Comtrade database. For that reason, bilateral commercialized successful section currencies, oregon integrating CIPS, makes economical sense, analysts say.

“For each clip you bash a transaction successful the dollar, determination is simply a hidden outgo that goes backmost to the US,” notes Sanusha Naidu, a overseas argumentation expert astatine South African deliberation tank, the Institute for Global Dialogue.

Now, according to the analyst, countries astir the satellite person rightly started asking: “Why indispensable we wage the US that cost?”

Instead of the buyer’s section currency getting converted into USD earlier being converted into the seller’s currency, with some parties risking losing immoderate gross successful the process, wealth tin present travel directly.

But for Danny Bradlow, a prof with the Centre for Advancement of Scholarship astatine the University of Pretoria, section currency commercialized faces challenges; and these are little astir what is imaginable and much astir what is practical.

Although 2 countries tin commercialized successful immoderate currency they choose, whether each enactment would privation stores of the other’s currency is unclear, helium said.

For example, if 2 countries with not galore transactions betwixt them – similar Botswana and Mexico – privation to commercialized goods, it would beryllium much applicable for them to person pulas and pesos into dollars to commercialized with the in-demand USD than to support ample amounts of 1 another’s tender.

Another situation successful bypassing the USD is that the “infrastructure that supports commercialized colony successful section currencies indispensable archetypal beryllium successful spot to guarantee the wide adoption of section currency transactions”, said Shirley Yu, managing manager of ACME Macro Advisory and manager of the China-Africa Initiative astatine the London School of Economics.

As good arsenic CIPS, she pointed to BRICS Pay (a decentralised fiscal messaging and outgo strategy designed for BRICS nations) and Project mBridge (a multi-central slope integer currency platform), which are enabled by blockchain technology. “The exertion infrastructure itself enables countries to commercialized successful section currencies without going done SWIFT oregon utilizing the dollar arsenic the mean of exchange”, but these request to beryllium built up, she said.

Although the fig of section currency transactions is increasing, it is inactive a fraction of what goes done SWIFT and the USD. The Chinese currency is inactive progressive successful little than 10 percent of planetary trade, for instance. While different currencies, similar the European tender, are besides successful usage globally, Yu noted that “the renminbi is simply a bigger commercialized colony currency than the euro”.

‘Incentives’ to change

But what has shifted and grown dramatically are “the incentives to alteration and make alternatives”, said Bradlow of Pretoria University, “and 1 of the ways you spot that is that the terms of golden is going up truthful much”.

Countries are nary longer treating the USD arsenic a afloat unchangeable reserve currency; instead, they are managing and hedging their hazard against it, says Naidu. The emergence successful golden and metallic prices signals this declining spot successful the dollar, she adds.

Chris Weafer, an concern expert with Macro-Advisory, a strategical consultancy that focuses connected Eurasia, says governmental changes successful the US person led to this distrust.

“President [Donald] Trump’s deficiency of predictability and the immense US indebtedness mean that the US dollar is not arsenic harmless oregon arsenic predictable arsenic it utilized to be.” The US nationalist indebtedness is presently much than $38 trillion.

“But adjacent without Trump, galore radical astir the satellite – adjacent successful the West – would accidental that the relation of the dollar is simply a problem,” Bradlow argued.

“Having a strategy that’s truthful heavy babelike connected the dollar means … vulnerability to US monetary and economical policies. Shifting to a strategy that is much diversified oregon much internationalised successful immoderate mode but not taxable to 1 country’s power would beryllium much acceptable to everyone,” helium says.

But does that mean the extremity – oregon adjacent the opening of the extremity – for the US dollar?

Most analysts inactive accidental no.

“The US dollar volition stay the planetary notation currency, for example, pricing lipid oregon materials, and would beryllium the satellite cardinal banks’ main reserve currency,” Weafer said.

There are presently “no alternatives to the US dollar successful presumption of currency”, helium said.

But experts besides accidental a replacement for the USD is not needfully what the Global South and BRICS countries are seeking. What they privation is diversification and alternate oregon further commercialized colony systems – ways to get astir SWIFT oregon a Western hegemonic strategy done which the US asserts its dominance.

However, adjacent these alternatives “will inactive trust connected the US dollar arsenic a notation currency”, Weafer noted.

Meanwhile, the US volition besides bash each it tin to support the dominance of the dollar, Yu said.

“President Trump wants to guarantee the dollar’s planetary dominance, done the Genius Act,” she notes, referring to the US instrumentality that creates a model for issuing and supervising US‑dollar stablecoins. A stablecoin is simply a cryptocurrency designed to support a unchangeable worth by being pegged to a reserve asset, similar the USD.

“The dollar is cardinal to the US nationalist power, therefore, nationalist security. The planetary dominance of the dollar volition beryllium protected astatine each costs.”

USD successful a ‘slow burn’ decline

Although the USD faces nary existent contention and volition support its position, for planetary relations adept Naidu, the statement playing retired is astir much than conscionable the “hard currency” worth of the dollar. It is astir the emergence and autumn of nations and however hegemonic powerfulness tends to highest and unravel aft 70-80 years.

The USD, similar the US empire itself, is simply a “wounded hegemon”, she said.

When a hegemon becomes wounded and feels its dominance challenged, “it becomes precise unsafe and unpredictable”.

Naidu said the 4 pillars of US structural powerfulness – security, finance, cognition and accumulation – person each been anchored successful the dollar. As much countries go risk-averse to the dollar, and arsenic alternate outgo systems emerge, these pillars weaken.

So portion the USD is not astir to beryllium abruptly replaced, it is undergoing a “slow burn” decline, she said, arguing that this is much unsafe and consequential than if it were a accelerated collapse.

Although the satellite is simply a agelong mode distant from having different currency to rival the dollar, if 1 were to look successful the “very agelong term”, galore experts accidental it mightiness beryllium China that is adjacent successful line.

If countries suffer assurance successful the US economy, governmental enactment and dollar, “eventually, it volition beryllium the emergence and greater usage of the Chinese yuan that volition interruption the planetary dominance of the US dollar,” Weafer said, particularly successful the Global South.

Yu said “the standard of dedollarisation volition surely grow among Global South countries”, particularly successful the airy of caller geopolitical events successful Venezuela, and US tensions with Iran.

But “the quantum displacement for the planetary currency architecture volition hap erstwhile the petroyuan replaces the petrodollar”, she added, referring to a script wherever the yuan becomes the currency utilized for planetary lipid pricing and colony – a relation presently performed by the USD.

“This event, if it does happen, volition awesome the extremity of the US dollar arsenic the planetary cardinal reserve currency,” Yu said, noting however China’s lipid commercialized with Iran and Russia implicit the past fewer years has already mostly been conducted successful renminbi.

The bottommost line, according to analysts, is that determination is nary imminent oregon adjacent medium-term menace to the USD, but that is little due to the fact that of thing the greenback is doing right, and much due to the fact that planetary trade, for the astir part, has fewer different options astatine the moment.