The US Dollar and Where is it Heading?

In Edward Fishman’s book Chokepoint: American Power in the Age of Economic Warfare, he describes the U.S. dollar to be considered as the “world’s default account and medium of exchange” for states around the world. Being the most powerful currency is a huge responsibility, which should not be taken lightly when it comes to weilding its power. Since the Bretton Woods system was established in 1944, the U.S. pegged the dollar to a gold standard. and became an economic powerhouse. This arrangement lasted until the 1970s when President Nixon decided that the dollar was the standard currency and that there was no need to back up the dollar with gold. In the year 2025, the U.S. dollar has been volatile in its stability and is now openly questioned of its authority. Many countries around the world have decided that the dollar’s dominance needs to be reexamined. 

Having a monopoly on currency generally means that in order to participate in the globalised economy, you need access to that currency. Being able to buy more dollars when the price goes down can be helpful to developing countries in many ways. The ability to pay down government debt with dollars will speed up the process, but if your own currency is not favourable, the debt cycle continues. That is why 2025 has been benefical for developing countries as we are seeing the most significant decline of the dollar since Nixon decided that the gold standard was no longer necessary. Below is a chart where the New York Times explains that the dollar “has weakened more than 10 percent over the past six months when compared with a basket of currencies from the country’s major trading partners.”

Many analysts believe that there are a number of factors for this decline, including aggressive trade negotiations, possible inflation, and the United States’ debt. It is also possible that the issue is much broader as the dollar dominance is not an issue that simply came to fruition this year. Several major players have been working towards changing the supremacy of a single currency and it seems as though developing countries are also interested in the change. The collaboration of emerging economies known as BRICS has been accelerating over the past fifteen years with more than 30 states applying to become members. The shared goal is to “build an alternative to what they see as the dominance of the Western viewpoint in major multilateral groupings, such as the World Bank, the Group of Seven (G7), and the UN Security Council.” This is especially important for members like China and Russia, who are seeking to reduce the power of the dollar with each country driving their own agenda.

For China, creating an economic alliance with many countries helps project their influence. BRICS is a great vehicle to help facilitate more trade in the developing world. OMFIF explains that this is especially significant in the “​​use of multiple national currencies to settle cross-border payments" which "is beginning to happen in the Brics bloc. The renminbi is reportedly already used in 50% of intra-Brics trade, whereas it made up only 2% in global payments in May 2025 according to Swift.” The Atlantic Council provides greater context in the chart below of what that percentage looks like in comparison to the strongest currencies:

For countries like Russia, the access to the dollar is much more significant as it leads to substantial and impactful consequences. Russia’s disinterest in using the dollar as a reserve currency started in 2014. The Dollar Dominance Monitor describes the process here:

“The share of dollar-denominated assets in the Central Bank of Russia’s reserves and the holdings of the National Welfare Fund noticeably diminished, in favor of the renminbi but also the yen, the British pound, and especially the euro. These efforts ultimately proved ineffective as Japan, the UK, and the EU all participated in the blocking on Russian sovereign assets instituted in the wake of the February 2022 invasion of Ukraine.”

With the United States still able to depend on its western partners to enforce economic sanctions, the dollar is still a powerful weapon to wield against Russia. Although, it is possible that these measures will not hold up in the long term when there are so many willing partners to skirt sanctions. The overlying problem is that it takes a very long time for an economy to shift its direction when there are limited economic sanctions as well as a staggered approach in enacting the measures. In order to avoid a global economic shock, itt can be percieved that western countries eased into sanctioning Russia. This worked in Russia's favour as it gave them time to adjust and accommodate how to trade with partners outside of the dollarised economy. Russian oil tankers are now flying under the radar using shadow fleets. The use of cryptocurrency is changing how Russian and other countries are able to trade with each other outside of the sanctions system. The U.S. dollar is not going to fall tomorrow and the currency still has a hegemonic hold on the global economy. Although, there seems to be a slight shift in what is happening with the U.S. dollar and there are many countries who are welcoming the transformation.