Standard Chartered: World Sees 'Re-dollarization,' Not De-dollarization

Standard Chartered economists are challenging the narrative of de-dollarization, asserting that the world is experiencing "re-dollarization" instead. Divya Devesh, co-head of FX research for ASEAN and South Asia at Standard Chartered, stated on July 15 that companies and investors continue to favor U.S. dollar holdings. This perspective contrasts with growing concerns among economists and commentators who fear that U.S. government debt, the use of sanctions, and increased non-dollar trade could diminish the dollar's global standing.

Devesh highlighted that the U.S. dollar's share of global foreign exchange reserves has decreased from 71% in 1999 to 57% in 2024, marking a 25-year low. However, she explained that this trend does not signify a move away from the dollar. As an example, Devesh pointed to Taiwan, where exporters retain the majority of their earnings in U.S. dollars, converting only about $2 out of every $100 into the New Taiwan dollar. This suggests a continued reliance on the greenback for international trade and investment.

While acknowledging potential challenges such as the U.S. federal debt burden, Standard Chartered's chief strategist and global head of research, Eric Robertsen, noted that many other countries face similar fiscal difficulties. He suggested that selling U.S. dollars might not be a viable strategy for investors given the global economic landscape. This view comes as some nations, including China and India, have been increasing their gold reserves, a move often seen as a hedge against dollar volatility and a step towards diversifying away from the U.S. currency. The People's Bank of China has engaged in multi-month gold buying sprees, and the Reserve Bank of India has repatriated approximately 100 tonnes of gold.