The debate about the US dollar’s dominance in global trade has seen a myriad of opposing viewpoints. While…

The debate about the US dollar’s dominance in global trade has seen a myriad of opposing viewpoints. While there is a growing de-dollarization sentiment, especially among developing nations, the dollar may not be at its end just yet. In fact, the greenback’s role in global economics may be growing according to some industry experts. Bank of America (BoA) strategist Ralph Axel is of the opinion that the US dollar is gaining on other currencies. Axel says that the world has been “rapidly dollarizing” over the last 10 years.

De-Dollarization Just A Temporary Inconvenience?

There is a sentiment that the US dollar is losing steam. The figures also seem to support this notion. The US dollar index (DXY) is down 9.7% year-to-date. This is the lowest the figure has been since the 1980s. The dip has led to substantial concerns about asset managers and financial institutions potentially pivoting away from the US Dollar to other currencies and gold. Despite the growing worries around the greenback, there are signs that the US dollar is still the de facto leader in global trade.

According to a report by Axel, “we find the evidence today suggests that the world is dollarizing rapidly, not de-dollarizing.“

To support their argument, the strategist refers to nonbank financial intermediaries. Nonbank financial intermediaries have increased their holdings to $63 trillion in 2022 as compared to the amount of $28 trillion in 2009. This increase in value shows the increasing role of the US dollar in the world economy. The dollar continues to cover about 88% of foreign exchange deals in the world.

Axel also believes that alternative digital currencies, like stablecoins, could further propel the dollar’s position. The report states, “new tech such as stablecoins…can speed up dollarization of the globe.“

Also Read: $2 Trillion in Dollar Stablecoins: US Treasury Backs the Surge

It is shocking to see the constructive picture of the US dollar when anti-USD sentiments have been rising. Although the report comes as a breath of fresh air, it does not imply that the de-dollarization movement is over. It has been perceived by many analysts that the days of the USD are numbered. BlackRock CEO Larry Fink also shares this opinion. We might be witnessing a situation where countries in the future may pull out of the dollar and use local currencies to trade, or we may even start trading in new currencies yet to be created.