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Former banker unoptimistic about initiative to reduce dominance of dollar

15 February 2024 12:39 (UTC+04:00)
Former banker unoptimistic about initiative to reduce dominance of dollar
Qabil Ashirov
Qabil Ashirov
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Although countries such as Iran, Russia, and Turkiye, whose currency values are unstable, have taken initiatives to reduce dependence on the dollar and euro and use more national currency from time to time, this has not been very effective. Moscow has been trying to convince its partners to quit the dollar and use national currencies. Many believe that it is impossible, as a number of countries have so far tried but did not succeed. However, Russia recently claimed that the use of national currency in mutual trade with Azerbaijan exceeded 54 percent.

Regarding this issue, a correspondent of Azernews learned the opinion of the MUSIAD board member and former banker, Ünsal Sözbir. The expert noted that predictions about macrotrends that will affect the future are very important in strategy studies. Based on these predictions, the strategies to implement are determined. One of the important headlines that has drawn attention in recent macrotrend studies is that regional-based trade will increase and new local markets will become increasingly important. He said that while regional trade is growing, the most important determinant here is the currency to be used. In the studies carried out so far, ideas about using the countries' own currencies in the region have come to the fore and are partially implemented.

“Trade in local currencies strengthens the economic independence and sovereignty of countries in the region. Relying on a foreign currency such as the dollar, euro, sterling, or yen for international trade can create economic vulnerabilities and limit a country's ability to pursue economic policies independently. By using local currencies, countries in the region can maintain greater control over monetary policies, manage capital flows, and protect their economic interests, promoting development and co-growth,” he said.

The former banker pointed out that below is the chart showing the distribution by currency types in 2019–2023, according to the SWIFT system used in international payments.

He noted that according to this table, the dollar, euro, sterling, Japanese yen, Canadian dollar, and Chinese yuan constitute the 6 most important currencies. As can be seen from this table, while the share of the euro has decreased, the dollar has maintained its position.

“According to all strategists and analysts trying to predict the future, regional trade and the use of local currencies will increase. Every day, we receive news of a new cooperation agreement and the use of local currencies. Money means power as a tool that shows a country's sovereignty and allows payment. Every country strives to establish and increase the reputation of its currency. It is also very important to be a convertible currency and to be accepted without incurring large costs when exchanging it with other countries' currencies,” Ünsal Sözbir said.

The former banker noted that another feature of money is that it is a means to store value. While trading in local currencies fulfils the payment function, people and businesses can make their savings in local currency, and that money must have a stable appearance against reserve currencies such as the dollar and euro. Excessive volatility and an unstable exchange rate regime may prevent local currencies from being a savings instrument.

“Therefore, it is unrealistic for states to give up the dollar and euro, through which a significant part of world trade is carried out, in the short term. In the long term, there will be a decline in the share of the dollar due to developments such as the use of local currencies in regional trade and the use of new currencies such as the Chinese Yuan as a store of value (reserve currency). The USA will want to maintain its existing power and will use every means of obstruction it can to reduce its impact and amount,” the former banker Ünsal Sözbir concluded.

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Qabil Ashirov is AzerNews’ staff journalist, follow him on Twitter: @g_Ashirov

Follow us on Twitter @AzerNewsAz

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