The Role of the US Dollar in the Global Economy

The US dollar has been the world’s dominant currency for decades, and it plays a crucial role in the global economy. Most international trade is conducted in dollars, and many countries hold significant reserves of US dollars. This reliance on the dollar has allowed the United States to maintain its economic and political power on the global stage.

However, the global financial crisis of 2008 highlighted the vulnerability of the global economy to the fluctuations of the US economy. As the US struggled to recover from the crisis, many countries began to question the wisdom of relying so heavily on the US dollar. This led to a shift away from the dollar as the world’s reserve currency, with countries such as China, Russia, India, Saudi Arabia, Iran and Japan leading the way.

Reasons for Dumping the Dollar

There are several reasons why countries are shifting away from the dollar as the world’s reserve currency. One of the main reasons is the increasing political and economic instability of the United States. The US has been embroiled in a number of foreign conflicts in recent years, which has led to a huge increase in government debt. This has led many countries to question the long-term stability of the US economy.

Another reason for the shift away from the dollar is the increasing strength of other currencies, particularly the Chinese yuan. China has been working hard to establish the yuan as a major player in the global economy, and many countries are now starting to use the yuan for international trade. This has weakened the dominance of the US dollar and made it less attractive as a reserve currency.

In addition, there is a growing concern among many countries about the power that the US wields over the global financial system. The US has been accused of using its position as the world’s reserve currency to impose its will on other countries, particularly in the area of international sanctions. Many countries are now looking for ways to reduce their reliance on the dollar in order to avoid being subject to US influence.

What It Means for the Future of the Global Economy

The shift away from the US dollar as the world’s reserve currency is a significant development that could have far-reaching consequences for the global economy. It could lead to a more multipolar world, with several currencies sharing the role of the world’s reserve currency. This could make the global financial system more stable and less vulnerable to the fluctuations of any one economy.

However, the shift away from the dollar could also lead to increased competition between countries for economic and political power. This could lead to increased tensions between countries and could make it more difficult to resolve global conflicts.

Conclusion

The shift away from the US dollar as the world’s reserve currency is a complex issue that has many different factors at play. While the long-term implications of this shift are still unclear, it is clear that the global economic landscape is changing rapidly. Countries such as China, Russia, India, Saudi Arabia, Iran and Japan are leading the way in this shift, and it is likely that other countries will follow suit in the coming years.

The post Why are China, Russia, India, Saudi, Iran and Japan Dumping the Dollar appeared first on IFN - Islamic Fintech News.

The Role of the US Dollar in the Global Economy

The US dollar has been the world’s dominant currency for decades, and it plays a crucial role in the global economy. Most international trade is conducted in dollars, and many countries hold significant reserves of US dollars. This reliance on the dollar has allowed the United States to maintain its economic and political power on the global stage.

However, the global financial crisis of 2008 highlighted the vulnerability of the global economy to the fluctuations of the US economy. As the US struggled to recover from the crisis, many countries began to question the wisdom of relying so heavily on the US dollar. This led to a shift away from the dollar as the world’s reserve currency, with countries such as China, Russia, India, Saudi Arabia, Iran and Japan leading the way.

Reasons for Dumping the Dollar

There are several reasons why countries are shifting away from the dollar as the world’s reserve currency. One of the main reasons is the increasing political and economic instability of the United States. The US has been embroiled in a number of foreign conflicts in recent years, which has led to a huge increase in government debt. This has led many countries to question the long-term stability of the US economy.

Another reason for the shift away from the dollar is the increasing strength of other currencies, particularly the Chinese yuan. China has been working hard to establish the yuan as a major player in the global economy, and many countries are now starting to use the yuan for international trade. This has weakened the dominance of the US dollar and made it less attractive as a reserve currency.

In addition, there is a growing concern among many countries about the power that the US wields over the global financial system. The US has been accused of using its position as the world’s reserve currency to impose its will on other countries, particularly in the area of international sanctions. Many countries are now looking for ways to reduce their reliance on the dollar in order to avoid being subject to US influence.

What It Means for the Future of the Global Economy

The shift away from the US dollar as the world’s reserve currency is a significant development that could have far-reaching consequences for the global economy. It could lead to a more multipolar world, with several currencies sharing the role of the world’s reserve currency. This could make the global financial system more stable and less vulnerable to the fluctuations of any one economy.

However, the shift away from the dollar could also lead to increased competition between countries for economic and political power. This could lead to increased tensions between countries and could make it more difficult to resolve global conflicts.

Conclusion

The shift away from the US dollar as the world’s reserve currency is a complex issue that has many different factors at play. While the long-term implications of this shift are still unclear, it is clear that the global economic landscape is changing rapidly. Countries such as China, Russia, India, Saudi Arabia, Iran and Japan are leading the way in this shift, and it is likely that other countries will follow suit in the coming years.

The post Why are China, Russia, India, Saudi, Iran and Japan Dumping the Dollar appeared first on IFN - Islamic Fintech News.

Deutsche Bank shares have plummeted 13% following a huge spike in the cost of insuring against its default. The world’s largest foreign exchange dealer is under intense scrutiny amid fears that it could be at risk of collapse.

The German lender, which has struggled to turn around its fortunes in recent years, has been hit by a series of legal and regulatory fines, as well as concerns over its exposure to risky assets. As a result, the cost of insuring against a default by Deutsche Bank has surged to levels not seen since the height of the financial crisis.

Investors are understandably concerned about the bank’s ability to weather the storm, with many choosing to sell their shares in the wake of the news. But is this a knee-jerk reaction, or is there something more sinister going on?

At the heart of the issue is the fact that Deutsche Bank has become something of a poster child for the problems facing the banking industry as a whole. Many investors worry that the bank’s business model is no longer fit for purpose, and that it may be unable to adapt to the changing market conditions.

So what can Deutsche Bank do to turn things around? There are no easy answers, but one thing that is clear is that the bank needs to take bold and decisive action to address the concerns of its investors.

One area that Deutsche Bank could focus on is its risk management practices. Given the recent surge in the cost of insuring against its default, it is clear that investors are worried about the bank’s ability to manage risk effectively.

Another area of concern for investors is the bank’s exposure to risky assets. Deutsche Bank has been criticised for its lack of diversification, with many arguing that it needs to reduce its reliance on investment banking and focus more on retail banking and asset management.

In addition to these issues, Deutsche Bank also faces significant regulatory and legal challenges. The bank has been fined billions of dollars in recent years for a variety of misconduct, including money laundering, tax evasion, and market manipulation.

Furthermore, there are signs that the banking industry as a whole may be entering a period of consolidation, which could provide Deutsche Bank with opportunities to acquire other businesses and expand its operations.

Ultimately, the fate of Deutsche Bank will depend on its ability to adapt to the changing market conditions and address the concerns of its investors. While there are no easy solutions, it is clear that bold and decisive action is needed if the bank is to avoid the fate of its predecessors.

In conclusion, the recent slump in Deutsche Bank’s shares is a clear indication of the challenges facing the banking industry as a whole. While there are no easy solutions, it is clear that the bank needs to take bold and decisive action if it is to regain the confidence of its investors and secure its future.

If Deutsche Bank were to collapse, it could have significant implications for other European banks and the wider financial system. The interconnectedness of the banking system means that the failure of one bank can have ripple effects throughout the system.

In the event of a collapse, other banks that have exposure to Deutsche Bank, either through direct lending or through trading activities, could be impacted. This could lead to a loss of confidence in the wider banking system, as investors worry that other banks may also be at risk.

In addition, a collapse of Deutsche Bank could trigger a wider economic downturn, as investors pull their money out of the markets and businesses struggle to access credit. This could lead to job losses, bankruptcies, and a slowdown in economic growth.

To prevent this scenario from occurring, regulators would likely step in to provide support for the bank and to prevent contagion from spreading. However, this would come at a cost, both in terms of the financial resources needed to prop up the bank and in terms of the loss of confidence in the banking system.

Overall, a potential collapse by Deutsche Bank would be a major concern for other European banks and for the wider financial system. It highlights the need for strong risk management practices and for regulators to remain vigilant in monitoring the health of the banking system.

The post Deutsche Bank shares slump 13% after huge spike in the cost of insuring against its default appeared first on IFN - Islamic Fintech News.

Deutsche Bank shares have plummeted 13% following a huge spike in the cost of insuring against its default. The world’s largest foreign exchange dealer is under intense scrutiny amid fears that it could be at risk of collapse.

The German lender, which has struggled to turn around its fortunes in recent years, has been hit by a series of legal and regulatory fines, as well as concerns over its exposure to risky assets. As a result, the cost of insuring against a default by Deutsche Bank has surged to levels not seen since the height of the financial crisis.

Investors are understandably concerned about the bank’s ability to weather the storm, with many choosing to sell their shares in the wake of the news. But is this a knee-jerk reaction, or is there something more sinister going on?

At the heart of the issue is the fact that Deutsche Bank has become something of a poster child for the problems facing the banking industry as a whole. Many investors worry that the bank’s business model is no longer fit for purpose, and that it may be unable to adapt to the changing market conditions.

So what can Deutsche Bank do to turn things around? There are no easy answers, but one thing that is clear is that the bank needs to take bold and decisive action to address the concerns of its investors.

One area that Deutsche Bank could focus on is its risk management practices. Given the recent surge in the cost of insuring against its default, it is clear that investors are worried about the bank’s ability to manage risk effectively.

Another area of concern for investors is the bank’s exposure to risky assets. Deutsche Bank has been criticised for its lack of diversification, with many arguing that it needs to reduce its reliance on investment banking and focus more on retail banking and asset management.

In addition to these issues, Deutsche Bank also faces significant regulatory and legal challenges. The bank has been fined billions of dollars in recent years for a variety of misconduct, including money laundering, tax evasion, and market manipulation.

Furthermore, there are signs that the banking industry as a whole may be entering a period of consolidation, which could provide Deutsche Bank with opportunities to acquire other businesses and expand its operations.

Ultimately, the fate of Deutsche Bank will depend on its ability to adapt to the changing market conditions and address the concerns of its investors. While there are no easy solutions, it is clear that bold and decisive action is needed if the bank is to avoid the fate of its predecessors.

In conclusion, the recent slump in Deutsche Bank’s shares is a clear indication of the challenges facing the banking industry as a whole. While there are no easy solutions, it is clear that the bank needs to take bold and decisive action if it is to regain the confidence of its investors and secure its future.

If Deutsche Bank were to collapse, it could have significant implications for other European banks and the wider financial system. The interconnectedness of the banking system means that the failure of one bank can have ripple effects throughout the system.

In the event of a collapse, other banks that have exposure to Deutsche Bank, either through direct lending or through trading activities, could be impacted. This could lead to a loss of confidence in the wider banking system, as investors worry that other banks may also be at risk.

In addition, a collapse of Deutsche Bank could trigger a wider economic downturn, as investors pull their money out of the markets and businesses struggle to access credit. This could lead to job losses, bankruptcies, and a slowdown in economic growth.

To prevent this scenario from occurring, regulators would likely step in to provide support for the bank and to prevent contagion from spreading. However, this would come at a cost, both in terms of the financial resources needed to prop up the bank and in terms of the loss of confidence in the banking system.

Overall, a potential collapse by Deutsche Bank would be a major concern for other European banks and for the wider financial system. It highlights the need for strong risk management practices and for regulators to remain vigilant in monitoring the health of the banking system.

The post Deutsche Bank shares slump 13% after huge spike in the cost of insuring against its default appeared first on IFN - Islamic Fintech News.

While the dollar remains the top currency for trade and foreign reserves, China, as the world’s largest oil importer, is pushing the yuan as a currency for oil deals, challenging the dollar’s lead in commodity markets. The Federal Reserve’s aggressive monetary tightening campaign sent the dollar soaring last year, making oil contracts more expensive as oil deals are largely priced in dollars. As a result, China is looking to control the price of oil and conduct trade in the currency that it controls.

During a recent trip to Saudi Arabia, Chinese President Xi Jinping urged countries in the Gulf Cooperation Council (GCC) to use the Shanghai Petroleum and National Gas Exchange to carry out yuan-based energy deals. This marked the birth of the petroyuan, according to a recent note from Credit Suisse analyst Zoltan Pozsar. China wants to dedollarize parts of the world after the currency’s dominant status was used against Russia.

Russia, Iran, and Venezuela account for 40% of OPEC+’s proven oil reserves, with the GCC making up another 40%. The petroyuan will pick up steam regionally, forcing many Asian countries to reconsider their trading routines. One of China’s central tenets of its commodity policy is strict oversight over even the most mundane details of crude and currency trade, which could aid in strengthening the country’s grip over energy markets.

The post China looks to weaken US dollar with petroyuan appeared first on IFN - Islamic Fintech News.

While the dollar remains the top currency for trade and foreign reserves, China, as the world’s largest oil importer, is pushing the yuan as a currency for oil deals, challenging the dollar’s lead in commodity markets. The Federal Reserve’s aggressive monetary tightening campaign sent the dollar soaring last year, making oil contracts more expensive as oil deals are largely priced in dollars. As a result, China is looking to control the price of oil and conduct trade in the currency that it controls.

During a recent trip to Saudi Arabia, Chinese President Xi Jinping urged countries in the Gulf Cooperation Council (GCC) to use the Shanghai Petroleum and National Gas Exchange to carry out yuan-based energy deals. This marked the birth of the petroyuan, according to a recent note from Credit Suisse analyst Zoltan Pozsar. China wants to dedollarize parts of the world after the currency’s dominant status was used against Russia.

Russia, Iran, and Venezuela account for 40% of OPEC+’s proven oil reserves, with the GCC making up another 40%. The petroyuan will pick up steam regionally, forcing many Asian countries to reconsider their trading routines. One of China’s central tenets of its commodity policy is strict oversight over even the most mundane details of crude and currency trade, which could aid in strengthening the country’s grip over energy markets.

The post China looks to weaken US dollar with petroyuan appeared first on IFN - Islamic Fintech News.

Tina Teng from financial services company CMC Markets noted that a sooner Federal Reserve pivot on rate hikes will likely cause another gold price surge due to a potential further decline in the US dollar and bond yields. This sentiment is echoed by other industry insiders, with CEO Randy Smallwood of Wheaton Precious Metals, a precious metals streaming company, forecasting gold prices to hit $2,500.

Investors have been flocking to gold and treasuries as bank stocks have been hit by the shuttering of Silicon Valley Bank and Credit Suisse’s implosion. Gold is currently trading at $1,940.68 per ounce, breaching $2,000 on Monday to strike its highest point since March 2022. The precious metal has risen around 10% since early March when SVB was hit by a bank run.

Demand for gold skyrocketed to an 11-year high in 2022, owing to “colossal central bank purchases,” according to the World Gold Council. Central banks bought a 55-year high of 1,136 tons of gold last year.

In late March, Fitch Solutions predicted that gold would notch a high of $2,075 “in the coming weeks.” The firm based that outlook on “global financial instability,” adding that it expects gold to “remain elevated in the coming years compared to pre-Covid levels.”

The Federal Reserve’s next moves are closely watched by investors and their impact on gold prices. The Fed began its two-day meeting on Tuesday, where it’s widely expected to approve a 25 basis point rate hike Wednesday, though predictions vary among analysts. Nicky Shiels, head of metals strategy at precious metals firm MKS Pamp, notes that the Fed will have to choose between higher inflation or a recession, and either outcome is bullish for gold. She forecasts gold to extend to $2,200 per ounce.

A weakening of the dollar may support gold prices, according to HSBC’s chief precious metals analyst James Steel, who expects a 25 basis point hike from the Fed. Steel noted that it’s unusual for gold prices and the dollar to rise simultaneously. This scenario typically occurs during periods of financial stress, where investors tend to favor the perceived safety of US Treasuries and gold.

Overall, the stars appear to be aligning for gold, with many analysts predicting a strong performance for the precious metal over the coming months. While there may be some fluctuations in the short term, the long-term outlook for gold looks bright, with continued central bank buying of gold boding well for its prices.

The post Gold Prices Poised to Reach an all-time High and Stay There appeared first on IFN - Islamic Fintech News.

Tina Teng from financial services company CMC Markets noted that a sooner Federal Reserve pivot on rate hikes will likely cause another gold price surge due to a potential further decline in the US dollar and bond yields. This sentiment is echoed by other industry insiders, with CEO Randy Smallwood of Wheaton Precious Metals, a precious metals streaming company, forecasting gold prices to hit $2,500.

Investors have been flocking to gold and treasuries as bank stocks have been hit by the shuttering of Silicon Valley Bank and Credit Suisse’s implosion. Gold is currently trading at $1,940.68 per ounce, breaching $2,000 on Monday to strike its highest point since March 2022. The precious metal has risen around 10% since early March when SVB was hit by a bank run.

Demand for gold skyrocketed to an 11-year high in 2022, owing to “colossal central bank purchases,” according to the World Gold Council. Central banks bought a 55-year high of 1,136 tons of gold last year.

In late March, Fitch Solutions predicted that gold would notch a high of $2,075 “in the coming weeks.” The firm based that outlook on “global financial instability,” adding that it expects gold to “remain elevated in the coming years compared to pre-Covid levels.”

The Federal Reserve’s next moves are closely watched by investors and their impact on gold prices. The Fed began its two-day meeting on Tuesday, where it’s widely expected to approve a 25 basis point rate hike Wednesday, though predictions vary among analysts. Nicky Shiels, head of metals strategy at precious metals firm MKS Pamp, notes that the Fed will have to choose between higher inflation or a recession, and either outcome is bullish for gold. She forecasts gold to extend to $2,200 per ounce.

A weakening of the dollar may support gold prices, according to HSBC’s chief precious metals analyst James Steel, who expects a 25 basis point hike from the Fed. Steel noted that it’s unusual for gold prices and the dollar to rise simultaneously. This scenario typically occurs during periods of financial stress, where investors tend to favor the perceived safety of US Treasuries and gold.

Overall, the stars appear to be aligning for gold, with many analysts predicting a strong performance for the precious metal over the coming months. While there may be some fluctuations in the short term, the long-term outlook for gold looks bright, with continued central bank buying of gold boding well for its prices.

The post Gold Prices Poised to Reach an all-time High and Stay There appeared first on IFN - Islamic Fintech News.

Trade settlement is a critical component of global commerce, facilitating the exchange of goods and services between nations. For many years, the US Dollar has been the dominant currency for trade settlement, with many countries using it as a reserve currency. However, in recent years, there has been a shift away from the US Dollar towards other currencies, notably the Chinese Yuan.

The Yuan’s rise as a potential global currency has been fuelled by China’s increasing economic clout and its efforts to internationalise the currency. As a result, more and more countries are beginning to settle trades in Yuan, rather than the US Dollar.

One notable example of this shift is the establishment of the China International Payment System (CIPS), which allows for the settlement of cross-border Yuan transactions. The system provides a more efficient and cost-effective way of settling trades in Yuan, reducing reliance on traditional payment systems such as SWIFT.

Furthermore, new global trade alliances are being established that are not reliant on the US Dollar. For example, the Belt and Road Initiative, China’s ambitious infrastructure development plan, has seen the establishment of new trade corridors that bypass the US Dollar entirely. Countries along these corridors can trade in Yuan, or other local currencies, without the need to convert to the US Dollar.

The European Union (EU) is also exploring the possibility of settling trades in currencies other than the US Dollar. In 2019, the EU launched the Instrument in Support of Trade Exchanges (INSTEX), a special-purpose vehicle designed to facilitate trade between the EU and Iran without using the US Dollar.

The shift away from the US Dollar towards other currencies may have significant implications for the global economy. For example, it may lead to a decrease in demand for US Dollars, which could impact the currency’s value. It could also lead to a reduction in the use of US financial institutions for trade settlement, impacting the US financial sector.

In conclusion, the shift away from the US Dollar towards other currencies, such as the Yuan, is a trend that is likely to continue in the coming years. The rise of new payment systems and global trade alliances that are not reliant on the US Dollar is evidence of this shift. While the full impact of this trend is yet to be seen, it is clear that it has the potential to reshape the global financial landscape.

The post Trade settlement is shifting away from the US Dollar and towards the Yuan and other currencies. appeared first on IFN - Islamic Fintech News.

Trade settlement is a critical component of global commerce, facilitating the exchange of goods and services between nations. For many years, the US Dollar has been the dominant currency for trade settlement, with many countries using it as a reserve currency. However, in recent years, there has been a shift away from the US Dollar towards other currencies, notably the Chinese Yuan.

The Yuan’s rise as a potential global currency has been fuelled by China’s increasing economic clout and its efforts to internationalise the currency. As a result, more and more countries are beginning to settle trades in Yuan, rather than the US Dollar.

One notable example of this shift is the establishment of the China International Payment System (CIPS), which allows for the settlement of cross-border Yuan transactions. The system provides a more efficient and cost-effective way of settling trades in Yuan, reducing reliance on traditional payment systems such as SWIFT.

Furthermore, new global trade alliances are being established that are not reliant on the US Dollar. For example, the Belt and Road Initiative, China’s ambitious infrastructure development plan, has seen the establishment of new trade corridors that bypass the US Dollar entirely. Countries along these corridors can trade in Yuan, or other local currencies, without the need to convert to the US Dollar.

The European Union (EU) is also exploring the possibility of settling trades in currencies other than the US Dollar. In 2019, the EU launched the Instrument in Support of Trade Exchanges (INSTEX), a special-purpose vehicle designed to facilitate trade between the EU and Iran without using the US Dollar.

The shift away from the US Dollar towards other currencies may have significant implications for the global economy. For example, it may lead to a decrease in demand for US Dollars, which could impact the currency’s value. It could also lead to a reduction in the use of US financial institutions for trade settlement, impacting the US financial sector.

In conclusion, the shift away from the US Dollar towards other currencies, such as the Yuan, is a trend that is likely to continue in the coming years. The rise of new payment systems and global trade alliances that are not reliant on the US Dollar is evidence of this shift. While the full impact of this trend is yet to be seen, it is clear that it has the potential to reshape the global financial landscape.

The post Trade settlement is shifting away from the US Dollar and towards the Yuan and other currencies. appeared first on IFN - Islamic Fintech News.