I have seen some of the posts here and also on social media calling on the possibility of not depending on dollars for running the global economic and financial system.
The balanced take would be that the chances of complete elimination of dollar is zero and they will definitely be a force to reckon with only the extent of their domination might diminish a bit.
But just like in life, anything is possible in markets as well. What I’m interested to know and learn is what would be the impact if dedollarization happens at a large scale ? What and how will the sectors, companies and countries will be impacted ?
I’ve seen absurd targets of 1 dollar = 3 rupees by 2030 as well. Assuming even that rupee reaches to 50 rs what will be the impact? How will our lives change?
Indian IT will be worst affected. There will be huge pay cuts/job losses in IT sector. Imports will get cheaper. Good for India as we are net importer. Bad for exports.
Another problem for us will be Chinese Yuan will become next reserve currency and owing to our territorial disputes with China it will be very difficult for us to maintain forex reserves in Yuan.
A lot of this dedollarization is just hoping for a miracle. There are lot of nuances as to why dollar and Euro are the reserve currency. I just came about this article that summarized all the nuances quite well.
This has been happening for over 20 years. Recent events will only speed up the process, due to the weaponisation of the dollar.
Also, I don’t think any ONE currency NEEDS to fill in the shoes of the reserve currency of the world. Each country can hold reserves in the currencies of it’s trading partners.
“According to the International Monetary Fund (IMF), the share of US-dollar-denominated foreign exchange reserves stood at 59.8%, as of Q3 2022, down from 72% in 1999. International players are continuing to switch from the greenback to other currencies for their reserves, overseas trade, and banking services.”
If value of dollar goes down ( not saying it will), then gold in dollar will become more expensive, same as how it is for gold in INR today.
And say if actual value of gold is flat and INR is flat too, then gold in INR should remain same while gold in Dollar keeps increasing. Again similar to today wrt INR : Gold in Dollar has not done much in 10 years.
No ambiguity really. If USD goes down, then both INR and Gold go up wrt USD. INR/Gold can remain same while USD goes down. ofc actual flows might be more complex, but markets are efficient enough that everything will adjust appropriately.