The de-dollarization may face its eventual demise in the near future. There is no doubt that there has been a growing sentiment against the US dollar over the last few years. China and other developing nations have expressed a growing desire to use local currencies for mutual trade. While the dollar’s position has faced substantial barriers, replacing the greenback may not be a realistic future. In a recent report, Goldman Sachs has shed more light on the dollar’s supposed decline.
US Dollar Dominance Declining, But Will Reign Supreme
According to Gurpreet Garewal, macro strategist at Goldman Sachs, US stocks have recovered from the tariff dip. US stocks not just reclaimed, but have gone higher than pre-tariff prices. The US dollar, on the other hand, does not follow the same pattern. Garewal highlights the growing sentiment that the dollar may be overvalued at the moment. The strategist believes this narrative is overstated. Garewal states, “The dollar can still rally during risk-off episodes.“
The Goldman Sachs strategist does not believe that the US dollar is on the verge of losing its global reserve status. Garewal noted the greenback’s current dominance in global foreign exchange reserves. She also calls attention to the fact that there are no alternative matches. The US dollar’s scale and liquidity make it a safe bet for global trade.
Garewal’s statements come as a major blow to the de-dollarization movement. While the strategist acknowledges the diminishing dominance of the US dollar, she believes that the USD will remain in power. Garewal states, “while the dollar’s dominance may be diminished, it is far from finished.“
Also Read: De-Dollarization Grows: Bulgaria 21st to Use Euro As Single Currency
The ongoing conflict between Israel and Iran has led to substantial uncertainties in global markets. Further escalation could lead to a substantial dip in the US dollar’s position. Iran is already a sanctioned nation. The country also finds backing from Russia and China, two major proponents of the de-dollarization agenda. A de-escalation could bring much-needed sentiment boost to investors.
