Dollar Dominance Fading Amid Growing China Trade, Russia Sanctions Risks, Ray Dalio Says – Economics Bitcoin News

Fewer nations are willing to hold the U.S. dollar as America’s share in the global economy becomes smaller while China’s role in international trade expands, billionaire Ray Dalio noted. The founder of the world’s largest hedge fund also said that Western sanctions on Russia have highlighted new risks of keeping dollar assets.

‘Dollar Is Debt,’ Central Banks Are Less Inclined to Hold It

The importance of the U.S. fiat in international trade is decreasing and as a result the dominance of the dollar is fading, billionaire investor Ray Dalio said in recent interviews on Youtube. He also pointed out that sanctions imposed on Russia over its invasion of Ukraine have exposed new threats for governments keeping assets in the American currency.

Central banks around the world are less inclined to hold the greenback, the founder of Bridgewater Associates remarked on the Julia La Roche Show last week. “Dollars are debt. In other words, when one holds a dollar — a central bank — they hold a debt asset,” he stated, according to excerpts quoted by the Business Insider on Tuesday.

Dalio elaborated that previously nations have been willing to expose themselves to such debt so that they can trade globally as the dollar has been widely used in international transactions. However, with China promoting the use of its currency, the yuan, in trade deals with countries like Brazil, Kazakhstan and others, the need for the dollar may decrease in the future.

At the same time, Western financial restrictions on Moscow have been pushing the Russian economy towards the yuan while Russia also saw $330 billion in currency reserves frozen, further preventing it from transacting in dollars or euros. Dalio believes that the sanctions have increased the perceived risks associated with dollar assets. He concluded:

So for those reasons, there’s less desire to hold U.S. dollar-denominated debt, which means yes, less U.S. dollars. So the supply-demand picture is worsening, particularly as we continue to have to sell them internationally to fund the deficit.

In an interview for Tom Bilyeu’s Youtube channel posted on Saturday, Ray Dalio again highlighted the weaponization of the U.S. dollar as a factor for its diminishing role. “The United States’ greatest weapon to use, as distinct from military weapon, is sanctions. So, sanctions means you freeze assets, those assets are the bonds. That happened with Russia and there are threats of it with other countries,…