The de-dollarization phenomenon is once again gaining swift momentum as the world unites forces against the US dollar.…

The de-dollarization phenomenon is once again gaining swift momentum as the world unites forces against the US dollar. With escalating geopolitical tensions and narratives, the US dollar is displaying a volatile stance. Coupled with its heavy weaponization, the world is now questioning whether it truly needs the US dollar for the long haul. In addition to this, several alliances, such as BRICS and ASEAN, are voicing their case for a local currency hegemony, thereby bolstering the multipolar currency narrative. In the midst of it, Bank of America has revealed two prominent reasons why ASEAN is pioneering this agenda in full swing.

Also Read: De-Dollarization Necessary: Unveiling The Risks Of A Strong US Dollar

ASEAN’s De-Dollarization Dreams

ASEAN has always been very vocal about its local currency narrative. The fact that the US dollar has been heavily weaponized has always irked the bloc, to the point where it has shared openly how it wants to reduce its dependency on the USD. Alongside that, Bank of America has recently revealed two leading reasons that are pushing ASEAN to continue the de-dollarization trend.

Firstly, according to the Bank, the majority of individuals and businesses have now begun converting their US dollar holdings into local currency. In simpler terms, the majority of the ASEAN businesses are increasing their dependency on local currency, a change that displays the pivot away from the USD.

Secondly, the bank stated how ASEAN’s large investors have started to hedge foreign investment more actively in a serious new change.

“The de-dollarization process in ASEAN may accelerate, primarily through the conversion of foreign exchange deposits accumulated since 2022.” Abhay Gupta, Asia Fixed Income and FX Strategist at Bank of America, further shared.

A Slow Yet Steady Process

Per Barclays’ Mitul Kolecha, the fact that ASEAN is embracing the de-dollarization process cannot be denied. In simpler terms, the expert labels the process as a trend packaged into a gradual setting, which is slowly making its way to the top.

“Countries are focusing on the fact that the US dollar has been and can be used as a weapon in trade, direct sanctions, and other areas… I think this is the real change over the past few months,” Kolecha shared.

Lin Li, head of Asia Global Markets Research at Mitsubishi UFJ Financial Group (MUFG), shared a similar stance, adding how local currency usage in ASEAN nations is rising rapidly.

“As Asian economies seek to reduce their reliance on the US dollar, particularly by using their own currencies as a medium of exchange to reduce foreign exchange risks, the trend of de-dollarization is strengthening.“

Also Read: De-Dollarization Is Fading: BoA Analyst Claims World Is Dollarizing