3 - 4 minute read
French President Emmanuel Macron recently visited China and met with Chinese President Xi Jinping, where he reportedly emphasized the need for European leaders to lessen their ties with the US and focus on avoiding potential conflicts between China and the US over Taiwan. Following his trip, Macron suggested that Europe should work on decreasing its dependence on the US dollar. The French President specifically said that Europe should lower its need to rely on the extraterritoriality of the US dollar. “If the tensions between the two superpowers heat up… we won’t have the time nor the resources to finance our strategic autonomy and we will become vassals,” he said.
The dollar has played a significant role in the global monetary system and global trade for many years, serving as the world’s sole reserve currency. It has remained the dominant currency in the foreign exchange market and is the most widely used currency for international transactions.
However, international efforts have been focused on ending the world’s longstanding need to engage with the dollar. A group of countries known as BRICS, including Brazil, Russia, India, China, and South Africa, are reportedly preparing to launch an alternative currency that would circumvent the dollar, pegged to precious metals or other hard assets. Additional countries, such as Saudi Arabia, Argentina, Iran, Indonesia, Turkey, and Egypt, have expressed interest in joining the alliance as well.
What This Means for Traders
The US dollar serves as the world’s reserve currency, so its decline would have dramatic and far-reaching effects on trading and investment strategies. After Macron’s comments, traders have been considering the possibility of Europe shifting its focus away from the dollar, which could weaken the currency’s dominance. Thus, traders must watch how such international movements occur, especially in the context of the ongoing trade conflict between the US and China.
It is essential to keep an eye on the development of the BRICS alliance and any changes in currency regulations, as these could significantly impact investments. Traders should remain cautious and assess such developments’ implications on their trades, keeping in mind the potential impact on their portfolios if the dollar declines from its dominant position in international trade.
Macron’s suggestion that Europe should reduce its dependence on the US dollar highlights the growing international efforts to end the need for the US currency’s dominance. It is crucial for traders to pay attention to such movements, especially with the upcoming launch of an alternative currency by the BRICS alliance. The world’s reliance on the US dollar has remained a significant concern for many countries, and movements like these could have significant implications for global trade and investments.