The US dollar will no longer be the world’s reserve currency as China and Brazil have agreed to settle trades in their own currencies, potentially lowering demand in US debt.
China and Brazil have agreed to settle trades in their own currencies, marking a shift away from the US dollar as the main currency for global trade. The US dollar is currently the world’s reserve currency, meaning it is the default currency for international trade and a global unit of account. However, recent events such as economic disruption in Iran and Russia have led many nations to consider contingency plans and move away from the dollar. While there are substantial obstacles to overcome in moving away from the dollar, discussions of alternatives such as cryptocurrencies, central bank digital currencies, or baskets of commodities have taken place. A side effect of establishing alternative reserve currencies may be a decrease in interest in US debt, potentially resulting in higher yields and higher levels of debt service on securities issued by the US Treasury.