The United States and other Western nations have imposed widespread economic sanctions against Russia in response to its invasion of Ukraine, which have effectively cut off Russia's central bank, sovereign wealth fund, banks, and certain individuals ...
The dollar is the world's top reserve currency. Analysts say using it as a financial weapon is likely to accelerate a move already under way by many countries to diversify investments into alternative currencies.US sanctions against Russia should hasten a move by some countries to reduce their reliance on the US dollar, which could also soften demand for Treasuries just as the Federal Reserve, the largest holder of US debt, looks to cut its bond holdings.
“The more we use it, the more other countries are going to diversify due to geopolitical reasons,” said Zongyuan Zoe Liu, a fellow for international political economy at the Council on Foreign Relations. Benchmark 10-year yields hit 2.56% on Monday, the highest since May 2019. Though the dollar is unlikely to be replaced as the reserve currency any time soon, any steady shift away from the greenback may lead to a more fragmented global economy where payments are more evenly split between currencies including the dollar, the euro and the yuan.
In 2021 it said it would ditch all US dollar assets in its National Wealth Fund and increase holdings in euros, Chinese yuan and gold. Russia’s Treasury holdings fell to negligible levels in mid-2018, and are down from around $150 billion a decade ago, according to Treasury International Capital data.
Saudi Arabia held $119 billion in Treasuries as of January 2022, down from $185 billion in February 2020.
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