Russia, China, Iran and other major rivals of the U.S. are reducing dollar reserves and create new forms of currency for international payments. But Bloomberg reported that at a meeting in Singapore, Southeast Asian officials and experts expressed their concern about that the U.S. has gone too far in weaponizing the dollar to apply pressure in geopolitical disputes.
George Yeo, the former foreign minister of Singapore, said that “if you weaponize the international financial system, alternatives will grow to replace it.” The former trade minister of Indonesia, Thomas Lembong, praised Southeast Asia central banks that have developed digital payments systems using local currencies. He also urged government officials to find new ways to avoid relying too much on the U.S. dollar: “I have believed for a very long time that reserve currency diversification is absolutely critical”.
It is very surprising that the criticism of the U.S. dollar policies is coming from reliable allies and countries that have traditionally favoured dollars but now owning too much of the US currency seems more like a potential liability as the U.S. uses the dollar to threaten countries who are not in line with their policies. If friendly countries in places like Southeast Asia join rivals such as Russia and China in reducing their reliance on the U.S. dollar, it will weaken the US currency.
Sven Franssen