The United States dollar has dominated global financial markets for decades. However, the ongoing war in Ukraine is causing many countries to explore moving away from the dollar for trade. This has created significant concerns about the future of the world’s most popular currency. финансовые новости со всего мира
The rouble has dropped more than 40 percent since the start of the war in Ukraine. This has put pressure on Russian oil companies and banks to sell their foreign-exchange assets to support the ruble. It has also led to rising inflation, higher interest rates and a weaker economy (Desai, 2000). The 1998 crisis illustrated how economic shocks can spread globally. It caused many international companies to write down their investments in Russia and it triggered a financial crisis in the United States that contributed to the collapse of the Long Term Capital Management hedge fund.
Inflation in Russia is rapidly rising and is above the government’s official 4% target rate. It is expected to rise to 6.5% in 2022 and could be even higher if the war in Ukraine continues. As a result, the Central Bank of Russia (CBR) has begun to tighten monetary policy. It has raised interest rates six times this year and shifted from an accommodative to neutral stance. It also stepped up its purchases of bonds and stocks.
Sanctions imposed by the US and its allies have made it difficult for Russia to access the global financial system. For example, the Moscow Exchange has reduced the percentage of assets that can be deposited in U.S. dollars in its collateral requirements. In addition, Western governments have frozen nearly half of Russia’s foreign-currency reserves and removed major Russian banks from the SWIFT interbank messaging service. This has made it difficult for the Kremlin to fund its operations and raise cash from international markets.
Amid these challenges, the Kremlin has sought to reduce its reliance on a global financial system that is dominated by the United States and its allies. The Kremlin has also tried to diversify its trade by allowing private citizens and businesses to settle some transactions in currencies other than the dollar.
But there are limits to how much Russia can de-dollarize its economy. The country needs to use other global currencies to make its payments for goods and services. These currencies need to be relatively stable and minted by a country that is not under sanction. Therefore, the most likely candidate for Russia is the Chinese yuan. This would enable Moscow to continue making payments for its goods and services without relying on the US dollar, which is subject to the sanctions. This is not a complete solution, but it will keep Russia from being completely isolated in the global financial system. It will take time, however, to build a system that is fully independent of the dollar. In the meantime, the rouble’s fall has given Russia an opportunity to rethink its strategy. This could mean more serious steps like allowing the country’s citizens to hold assets in other currencies other than the dollar.
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