De-dollarisation 2026: Global trade is entering a phase where policy swings, not relative efficiency, are shaping outcomes. Donald Trump’s tariff bursts have started to look less like negotiation and more like compulsion. That matters because coercive trade policy does not just reroute goods. It also forces countries and investors to reassess the reliability of the system that clears trade and stores value.
The World Uncertainty Index has surged to extreme levels in early 2026, reflecting how quickly geopolitics and policy have crowded out predictable rule-making. The dollar, which benefits from stability and habit, does not thrive in a world where Washington’s choices look erratic. Fund managers are explicitly linking political risk and perceived threats to central bank independence with a weaker dollar narrative.
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That is the backdrop for the renewed de-dollarisation argument. Not because the dollar is about to be dethroned, but because the incentives to reduce single-currency exposure are strengthening.
Dollar dominance rests on institutions
The dollar’s primacy has always been institutional before it was ideological. Bretton Woods formalised an architecture that later evolved into a dollar-centred financial system. The United States’ economic scale, deep Treasury market, and network effects across trade invoicing, payments, derivatives, and custody create a gravitational pull that is hard to replicate.
But the same architecture also gives Washington leverage. Influence over multilateral lenders and a sanctions toolkit anchored in dollar plumbing make the currency more than a medium of exchange. That dual role, liquidity plus leverage, is why the debate returns whenever U.S. policy begins to look transactional.
The post-2008 period seeded the first serious wave of resentment about dollar centrality. A decade later, the trigger is different. It is not the crisis of Wall Street. It is the credibility cost of politicised trade and finance.
IMF data shows a slow leak, not a collapse
The dollar is losing share in official reserves, but the pace is incremental. IMF COFER data reported the dollar’s share of global reserves at about 57.7% in Q1 2025, down from much higher levels in earlier decades. Subsequent IMF data briefs show further modest slippage in 2025 as valuation effects and diversification both play a role.
In parallel, the dollar’s market performance reveals this mood shift. Several major research notes pegged the dollar’s fall in the first half of 2025 at roughly 11%, one of the worst first-half performances in decades.
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Reserve composition and exchange rates are not the same story, but they rhyme. One reflects long-duration preference. The other reflects today’s risk pricing. Both are signalling discomfort with concentrated exposure to U.S. policy risk.
US fiscal arithmetic is now part of the currency story
De-dollarisation talk would stay academic if the U.S. balance sheet looked orderly. It does not. U.S. Treasury fiscal data places federal debt around the $37 trillion-plus range in 2025. Interest costs are also becoming a political and macro constraint, with commentary in early 2026 pointing to debt interest tracking towards $1 trillion-plus.
The issue is not that the United States cannot service debt. It can. The issue is that large deficits, high debt, and volatile politics make the “risk-free” asset feel less insulated from domestic bargaining. For reserve managers, that translates into a simple portfolio question: why run a single point of failure, even if it has been reliable for decades?
Sanctions add another layer. The more the dollar system is used as a policy tool, the more countries with geopolitical exposure look for optionality, even if they cannot exit the dollar at scale.
Euro as alternative: Credible, but constrained
The euro remains the only large-scale substitute that already functions as a reserve and payment currency. Its share of global reserves sits around one-fifth in recent COFER releases. The eurozone also offers institutional continuity that markets recognise.
But the euro’s ceiling is political. A fragmented fiscal backbone, uneven growth, demographics, and the EU’s limited hard-power projection restrict how far the euro can expand as a universal anchor. The euro can absorb diversification flows. It struggles to become the default for everyone.
Renminbi: Large footprint, incomplete convertibility
China’s renminbi has been positioned as a currency with global ambitions and regional leverage, helped by trade links and payment rails aligned with China’s commercial reach. Inclusion in the IMF’s Special Drawing Rights basket in 2016 was an institutional marker of that trajectory.
Yet the renminbi’s constraint is structural, not rhetorical. Capital account controls and a financial system still shaped by state priorities limit the currency’s ability to serve as an unconstrained reserve asset at global scale. This is not a temporary hurdle. It is a trade-off Beijing has chosen, and it caps how quickly the yuan can become a true anchor.
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Regional currency blocs and bilateral settlement
A more plausible direction is not a single successor, but a messy blend of local anchors. Countries are building bilateral settlement arrangements, swap lines, and regional mechanisms that reduce the need to intermediate every transaction through dollars.
For India, the rupee’s role here is realistic but bounded. The goal is not to replace the dollar. It is to expand rupee settlement where trade relationships and payment infrastructure make it workable, especially across South Asia and parts of the Indian Ocean economy. That is incremental resilience, not grand replacement.
Similar logic applies to other regions experimenting with local currency usage. These initiatives can reduce friction and lower sanction exposure in specific corridors, without creating a new global reserve hegemon.
CBDCs and payment rails
Central bank digital currencies and modern payment rails could change cross-border settlement economics over time. Their promise is speed, transparency, and lower transaction costs. But CBDCs do not automatically create reserve demand. Trust, rule-of-law expectations, and open capital markets still matter for reserve status.
Where CBDCs can matter sooner is by reducing reliance on legacy correspondent banking chains for certain flows. That is not de-dollarisation in the reserve sense. It is de-dollarisation in the plumbing sense, the quiet building of alternatives.
What changes, even if the dollar stays dominant
De-dollarisation is no longer just conference chatter. It is now a rational response to a world where U.S. trade policy is openly weaponised and global uncertainty is structurally elevated.
Still, a multi-currency world does not require the dollar to collapse. It only requires the marginal transaction, the marginal reserve allocation, and the marginal invoicing decision to diversify. That is how dominance erodes: slowly, through repeated incentives to seek optionality.
For the next few years, the dollar will remain central because no alternative matches its depth and liquidity. But the system around it is becoming more plural, more regional, and less trusting of a single policy centre.
Radha Kaushik is a research scholar, and Dr Asheesh Pandey Professor of Finance and Head Research at the Indian Institute of Foreign Trade (IIFT), New Delhi.