It’s not quite a coup yet, but let’s just say, the dollar’s crown isn’t sitting as comfortably as it once did.

Across Asia, the slow burn of de-dollarization is turning into a steady fire. Geopolitical jitters, unpredictable U.S. policymaking, a softer dollar, and a growing desire for financial sovereignty are nudging economies to rethink their reliance on the greenback. This isn’t some fringe theory anymore, major regional powers are actively sketching the outlines of a post-dollar world.

Case in point: ASEAN recently announced its Economic Community Strategic Plan (2026–2030), doubling down on the use of local currencies in cross-border trade and investment. Why – to reduce their exposure to volatile exchange rates and strengthen payment links within the region. Translation: fewer dollars, more bahts, rupiahs, and ringgits.

Experts say Trump-era trade tantrums and the dollar’s recent slide only accelerated what was already underway. “The dollar’s weaponization – be it through sanctions or trade negotiations – has made even the dollar’s oldest friends nervous,” says Mitul Kotecha of Barclays. As of 2024, the greenback’s share in global FX reserves had dipped to 57.8%, down from over 70% at the turn of the millennium.

From the ground up, the shift is visible. In ASEAN, both individuals and corporates are converting their dollar holdings into local currencies. Big institutional players – think pension funds, insurers, and hedge funds – are also hedging aggressively against dollar volatility, fueling demand for regional currencies like the yen, won, and Taiwan dollar.

Again, China, never one to play second fiddle, is aggressively pushing for yuan-based trade settlements. Meanwhile, the BRICS bloc is slowly building alternative payment rails to reduce SWIFT dependency, and, by extension, dollar dominance.

As Barclays’ Kotecha puts it: “You can see it in central bank reserves, you can see it in trade flows, and you can definitely see it in policy intentions.”

So, while the dollar isn’t on life support just yet, it’s certainly undergoing an identity crisis, and the rest of the world seems more than willing to explore their options.

So, is the dollar really in trouble—or just catching its breath?

That’s the million-dollar (or should we say multi-trillion-dollar) question.

Some economists argue that what we’re seeing is more of a cyclical wobble than a full-blown dethroning. Cedric Chehab of BMI says that unless the U.S. turns up the heat with aggressive sanctions or forces pension funds to “buy American” by law, the dollar isn’t going anywhere in a hurry. In short: unless Washington overplays its hand, the greenback still rules the playground.

Sure, some countries are trimming their dollar exposure. But tearing down the dollar’s reserve currency dominance – that’s a whole different ballgame. As ING’s Francesco Pesole puts it, “No other currency holds the same liquidity, depth of bond and credit markets.” Translation: the dollar may be bruised, but it’s still got the most muscle.

Here is another important distinction: dollar weakness isn’t the same thing as de-dollarization. The U.S. dollar has had rough patches before – different presidents, different crises – but it has always bounced back as the go-to global reserve.

Even today, over half the world’s trade is still priced in dollars. That’s not a sign of collapse, it’s just a sign the dollar is going through one of its moody phases. Like the favorite band from the ’90s, it may not be topping charts right now, but it’s still headlining parties.

That said, there’s growing consensus that as a reserve asset, the dollar’s sheen is slowly wearing off; some even hinting at what might fill the gap – good old gold. Because when the world gets nervous, it turns to the one thing that doesn’t tweet, crash, or get sanctioned: a shiny metal you can stash in a vault.

The Alternate Take: Is the World Actually Dollarizing More?

Now, here’s where things get interesting. Just when everyone’s writing the dollar’s obituary, Bank of America shows up with a contrarian mic drop: the world isn’t de-dollarizing – it’s dollarizing even faster.

Yes, the U.S. Dollar Index is down about 8.65% this year – the worst start since 1985. And yes, that’s triggered all sorts of hand-wringing about whether we’re seeing a mass exodus from the greenback. But BoA’s research team says: not so fast.

According to them, it’s not a retreat, it’s a reloading.

Their logic – follow the money and the data. Nonbank financial players (think pension funds, mortgage servicers, and PE giants) saw their assets balloon from $28 trillion in 2009 to a jaw-dropping $63 trillion in 2022. That’s a whole lot of dollar-denominated firepower being added to the system.

Add to that the fact that U.S. banks have more than doubled their deposits since the global financial crisis, and Uncle Sam’s liabilities are stacking up too – fueling even more demand for dollar-based debt.

Likewise, new tech like stablecoins may be accelerating the dollar’s reach globally. That’s right, crypto (often painted as the dollar’s nemesis) could actually be helping it conquer new territory.

As BoA’s Ralph Axel puts it, even though de-dollarization is the buzzword of the moment, the hard numbers show the opposite. The world might talk diversification – but when it comes to trust and scale, they’re still putting their chips on the dollar.

The Dollar’s Not Dead…Yet!

Now, the fact that Bank of America is suddenly sounding bullish on the dollar? (that turned a few heads. Especially because the same bank – just days ago – was calling itself a “core dollar bear.”) So, what gives?

The truth is, this new take isn’t some radical flip-flop. It’s just a reminder of what many quietly know but rarely say out loud: the U.S. dollar isn’t going anywhere. At least, not anytime soon. With 88% of global foreign exchange transactions still routed through it and that number staying rock-solid for over two decades – the greenback continues to be the glue holding global finance together.

So why’s the dollar been slipping, then?

Simple: not because the world suddenly found a new favorite. There’s no hot new currency waiting in the wings. Central banks, commodity traders – everyone still needs the dollar.

And for countries trying to manage their own currencies – The dollar’s like that dependable old calculator – clunky, maybe, but it always works.

What we’re seeing is more about investors recalibrating. With U.S. fiscal policies looking like a seesaw lately, and other markets, like Europe’s government bonds, suddenly becoming more attractive, investors are just being pickier about the price they’re willing to pay for U.S. assets.

And while de-dollarization could still happen, eventually, it’s less of a stampede and more of a glacial shuffle.

Dollar’s Slump Hits Home And Abroad
Now as an American planning that dream trip to Europe this summer – the dollar might not stretch as far as it used to.

Thanks to a near 9% plunge since January – half of that in just April – the once-mighty greenback has been losing a bit of its shine. And while currency swings are nothing new, this one feels different.

Sure, currencies fluctuate all the time. But this particular fall isn’t just about routine market jitters. It’s tied to a broader crisis of confidence in U.S. economic policymaking.

Bilge Erten, an economics professor at Northeastern, points to a cocktail of factors: lingering effects of Trump-era tariffs and tax cuts, ballooning deficits, and an overall nervousness about whether the U.S. government can keep its fiscal promises.

Therefore, Investors are starting to look at the U.S. a little sideways.

As confidence dips, investors start dumping U.S. bonds. Less demand means a weaker dollar. And that, in turn, leads to one uncomfortable reality: everything from imported goods to travel expenses starts getting more expensive.

“If you’re buying anything that comes from outside the U.S., expect prices to creep up,” says Erten. “And if you’re traveling? That hotel room in Tuscany or sushi in Tokyo will cost more dollars than it did last year.”

Meanwhile, international tourists visiting the U.S. are in for a treat—their euros, yens and pounds suddenly stretch further.

But it’s not all doom. A weaker dollar does have a silver lining: American-made goods become cheaper for foreign buyers. That could, in theory, boost exports. Some even think it might help shave down the federal deficit. But Erten isn’t convinced: “In sectors where the U.S. already dominates, it’s not like they really need that extra push.”

And here’s where things get a bit more existential. For decades, the U.S. dollar has been the world’s go-to safe asset. Around 59% of global reserves are still held in dollars. But lately, cracks are starting to show. Countries are beginning to ask: is it wise to peg our economic future to one country’s currency and policy whims?

Some are experimenting. China’s been doing currency swap deals with Brazil. There’s talk of a “multi-polar reserve system” where no single currency dominates, and regions rely on their own currency baskets.

The Last Bit,

But for all the noise, the truth is blunt: there’s no real contender to replace the dollar. Not yet.

As Erten puts it: “The world wants to move away from the dollar… but there’s just not a very good substitute.”

So for now, the dollar’s still in the driver’s seat but the passengers are increasingly restless.