US obsessive money-printing hints de-dollarization

As United States stocks continue to hit new highs lifted by rounds of excessive fiscal stimulus_ many countries are stepping up their de-dollarization efforts to reduce reliance on the greenback amid fears of a potentially weaponized US dollar.

US stocks rallied on Monday with the Dow Jones Industrial Average up 1.16 percent_ the S&P 500 up 1.47 percent and the Nasdaq Composite up 1.74 percent.

As part of efforts to revive the pandemic-plagued US economy_ the US Fed has cut interest rates to zero and implemented unlimited quantitative easing. Following the recently signed 'Relief Bill' that totaled $1.9 trillion_ the US has unleashed fiscal stimulus spending of $5.2 trillion since the coronavirus crisis began_ or about 25 percent of US GDP in 2020.

Since some emerging economies still heavily rely on the dollar_ excessive monetary easing by the US could weaken their own currencies. Meanwhile_ economies whose foreign exchange reserves are heavily concentrated in dollar-denominated assets may see an asset "boom and bust" in the near future_ from which it could be difficult to recover_ Xi Junyang_ a professor at the Shanghai University of Finance and Economics_ told.

Fears of dollar-associated financial risks as well as the political risks of a weaponized dollar if the Biden administration continues the confrontational approach of Donald Trump_ are prompting many countries_ especially emerging economies_ to swiftly push for de-dollarization.

The US dollar's share of global currency reserves plunged to 59 percent in the fourth quarter of 2020_ the lowest in a quarter of a century_ IMF data showed on March 31.

Countries in the Asia-Pacific region are preparing to switch to non-dollar mutual settlements_ while African and Latin American countries showing growing interest in such efforts_ the Sputnik news agency reported on Monday_ citing an interview with Russian Deputy Foreign Minister Alexander Pankin. European countries have also set up a new payment system for trade with Iran to bypass US sanctions on the latter.

As US unilateral sanctions undermine confidence in the dollar_ the Russian government is also moving to distance itself from the dollar system to minimize any possible economic impact. The Sputnik report said that Russia continues its effort to synchronize national payment systems with foreign nations_ such as China and Japan_ for the removal of dollars.

On March 31_ major Asia-Pacific economies_ including China_ Japan_ South Korea and the 10 ASEAN members_ implemented an amended financing agreement_ the Chiang Mai Initiative Multilateralization (CMIM)_ to bolster regional financial self-reliance by promoting the use of local currencies and cutting reliance on the US dollar.

Under the amended agreement_ CMIM members can now access up to 40 percent - compared with 30 percent before the amendment - of their maximum borrowing amount from the facility without the need for any IMF lending conditions.

These tools are an effective way to counter the hegemony of the US dollar_ though it will take time to see any real increase in the use of local currencies_ which could be a difficult process_ told Zhao Qingming_ a veteran financial expert.