Dedollarization To Pick Pace

Dedollarization To Pick Pace by Ashly Chole last updated on April 08, 2025

De-Dollarization To Pick Pace - Deutsche Bank

According to Deutsche Bank, the process of de-dollarization will pick up pace in the coming months and years. This has to do with the isolationist policies of the US government.

Right now, the Federal Reserve is serving as the pillar for global financial stability. But if the Fed withholds the funding of the US Dollar to allies during crucial times, it will force the allies to look towards other currencies.

According to media reports, the ECB is already asking questions about whether it can still rely on the Federal Reserve for funding. The trust in the USA is now at historic lows, mainly due to the Trump administration's policies.

If we look back, the Federal Reserve has always provided dollar funding to the ECB during market stress. This has allowed the US Dollar to remain dominant in capital flows and economic trade.

But if the USA withdraws from this support, it will raise the systemic financial stress. As a result, the only way forward for the global financial system would be to replace the US Dollar with a different currency.

In the short-term, the shortage of liquidity will make dollar funding more expensive. Over the long-term, this will increase the speed of de-dollarization.

In addition, the financial stress in Europe or another part of the world will also make its way into the US financial system.

According to Rabobank, the questions asked by the ECB show that things are changing fast. The ties between Europe and the USA are also a reason why the ECB is now thinking like that.

Deutsche Bank added that withdrawing the Fed Swap lines will lead to financial instability, which cannot be fathomed at this time.

Over all, it seems that the trend of the de-dollarization is now back on the horizon as the countries will now start to look at alternatives.