US Treasury Secretary Defends Dollar Dominance – U.S. Treasury Secretary Janet Yellen has expressed support for the continued dominance of the U.S. dollar in response to increasing attempts by emerging countries to reduce their reliance on it. Specifically, Brazilian President Luiz Inácio Lula da Silva intends to address the issue of reducing dollar usage at the upcoming BRICS meeting.
Yellen emphasized the extensive use of the dollar in international trade as a valid justification for its widespread acceptance. During the summit, Brazilian President Luiz Inácio Lula da Silva participated in a panel alongside South African President Cyril Ramaphosa. Echoing his previous statements, Lula da Silva reiterated his plea for nations to move away from the U.S. dollar and instead conduct trade using their respective national currencies or alternative options.
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The Brazilian leader emphasized that relying on the USD for international trade places countries such as Brazil in an unfavorable position. Ramaphosa responded to Lula’s de-dollarization push by saying that “the issue of currency” would be “on the agenda” for the upcoming BRICS meeting, which South Africa is hosting in August, the Financial Times reported. The BRICS countries are Brazil, Russia, India, China, and South Africa.
Commenting on emerging countries, including Brazil, pushing for de-dollarization, Yellen noted that it would be challenging for countries to find a viable alternative to the U.S. dollar, which has dominated global trade for decades. The treasury secretary was quoted as saying: “There is a very good reason why the dollar is used widely in trade and that’s because we have deep, liquid, open capital markets, rule of law and long and deep financial instruments.”
While Yellen defended the U.S. dollar, she acknowledged in April that over time, the use of financial sanctions “could undermine the hegemony of the dollar.” She also said earlier this month that the ongoing trend of countries seeking to establish an alternative reserve currency to rival the U.S. dollar “is something that we simply have to expect.” In addition, she emphasized that no country is able to replicate the USD, including China.
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In the meantime, there is an increasing trend among emerging economies to intensify their de-dollarization efforts, including countries within the BRICS economic bloc and the Association of Southeast Asian Nations (ASEAN). Additionally, the BRICS bloc has put forward a proposal for a shared currency, which is anticipated to be a topic of discussion at the forthcoming summit scheduled for August.
