Bold statement: The strikes on Iran by Trump-era forces are accelerating a global shift away from the dollar’s uncontested dominance—and that shift is only gaining pace from here.
Donald Trump’s Iran action, carried out under the mock-ready code name Operation Epic Fury, is another display of aggressive state power from a government that often seems to prize showmanship over diplomacy. Beyond the immediate chaos in the Middle East, this move reinforces a perception that Washington operates with scant regard for international law or established norms—whether in trade tariffs or actions in places like Venezuela—as part of a broader pattern.
In financial terms, such behavior feeds a growing, albeit gradual, rebalancing away from the dollar toward a more intricate, multipolar world order. The trade-weighted dollar—the value of the U.S. currency against a basket of major currencies—has fallen about 7% over the last year, despite solid U.S. growth and booming stock markets. This dip reflects not just inflation expectations and interest-rate trajectories, but also a sense that U.S. policy is less predictable and coherent than it once seemed.
Discussants at a London conference hosted by the Centre for Inclusive Trade Policy argued that the outcome isn’t a simple replacement of the dollar by another single currency. Rather, the trajectory points toward a more complex, multi-polar system where the greenback remains dominant in trade, but without exclusive control. China’s renminbi is increasingly used in international transactions, and central banks are quietly diversifying reserves away from dollars. The share of global reserves held in dollars slipped from about 71% in 2001 to roughly 57% by late last year.
The seeds of de-dollarisation were sown long ago. During the 2007–08 financial crisis, the Federal Reserve extended temporary swap lines to other central banks, effectively providing dollar liquidity to a wider circle. While this move stabilized the offshore dollar system, it also exposed the United States’ leverage—the “lifeblood” of the world economy—through the dollar’s central role.
At the same time, the toolset of geopolitical leverage is expanding. Economic sanctions—asset freezes, SWIFT access removals, and other financial pressure—highlight the risk of what scholars Henry Farrell and Abraham Newman describe as “weaponised interdependence.” Canadian prime minister Mark Carney echoed this concern at Davos, warning that great powers are increasingly using economic integration, tariffs, and financial infrastructure as coercive tools and vulnerabilities that other nations must navigate.
Washington’s willingness to deploy its financial power as a coercive instrument is driving a push for alternatives to the dollar. A key factor is the availability of new technological and financial solutions that make settlement and exchange cheaper and faster. For instance, the European Central Bank recently announced stronger repo arrangements—standing euro lending facilities to other central banks during crises. While this is a single piece of a vast system, the ECB aims to reassure markets that the euro can function as a lender of last resort, reducing the urgency of emergency firefighting during crises and supporting euro stability.
Analysts like Alejandro Fiorito of The Conference Board point out that China and Europe are investing in measures to insulate themselves, including digital currencies and expanded repo of currencies, which can be viewed as self-insurance against future shocks.
Among the Brics group—Brazil, Russia, India, China, and various newer members—there has long been a push to diminish dollar dependence. Even if a Brics-wide currency remains theoretical for now, there is increasing talk about building financial linkages that bypass the U.S., including swap arrangements for emergencies and greater interoperability among central bank digital currencies.
Francisco Quintana of Edinburgh Law School summarizes the trend: a gradual, global shift away from heavy reliance on the United States, driven by concerns about the reliability of U.S. institutions and policies.
For the U.S., this transition carries costs. Recent research from the Federal Reserve Bank of St. Louis notes a notable decline in the “convenience yield” of U.S. Treasuries—the extra benefit investors receive from holding U.S. government debt as a safe, liquid asset. Factors such as persistent deficits and rising debt, along with waning trust in U.S. institutions, contribute to this erosion. With the IMF projecting debt rising toward 130% of GDP in five years, the fiscal outlook could become more expensive for the United States in the long run.
In the near term, Treasuries remain a refuge for investors, as seen when yields moved lower as markets sought safety amid fears of a broader market crash. Yet the push toward de-dollarisation has gained momentum, fed by Trump-era unpredictability and a global appetite for fallbacks and alternatives. The United States may find itself facing a future in which its currency’s dominance is thinner and more contested—posing strategic and economic challenges that will shape global finance for years to come.
Where this leads next isn’t settled. But the trajectory is clear: more countries are quietly building a financial architecture less dependent on the United States, and the dollar’s undisputed primacy may gradually erode as a result.
