In previous posts, we have already begun to look at the key drivers of the US outperformance over the past decade.
Recent Shifts (2025 Trend)
Since early 2025, international equities have begun to outperform the S&P 500, and European and Asian equities have regained investor interest. Global market currencies are also widely dominated by the US dollar.
Factors include optimism around the following three big themes.
DE-DOLLARIZATION. DE-AMERICANIZATION. DIVERSIFICATION.
Historical context and significance of the US dollar
The US dollar became the world's primary reserve currency after World War II, as enshrined in the Bretton Woods Agreement of 1944. This system pegged other currencies to the dollar, which was convertible into gold, making the dollar the backbone of international finance. The United States became the world's leading economic power, and the dollar replaced the British pound sterling as the dominant currency for global trade and reserves.
The dollar has been the most widely held reserve currency for decades. As of the end of 2024, it still accounts for about 57% of global foreign exchange reserves, far more than the euro (20%) and the Japanese yen (6%). However, this share has fallen from over 70% in 2001, signaling a gradual shift and prompting discussions about de-dollarization.
How De-Dollarization Works
Countries looking to reduce their reliance on the dollar are pursuing several strategies:
Developing alternative financial systems: Some countries and blocs, such as BRICS, are working to develop alternatives to the US-dominated SWIFT payment system to avoid the risk of sanctions and gain true economic and political independence.
Reasons for de-dollarization
The move towards de-dollarization is driven by geopolitical and economic factors:
Implications and outlook
While the dollar remains dominant, a more de-dollarized world is already changing global economic power. The U.S. may lose some advantages, such as lower borrowing costs and geopolitical influence. For the U.S. economy, de-dollarization could lead to a weaker currency, higher interest rates, and reduced foreign investment, although some effects, such as inflation from a weaker dollar, could belimited .
For other countries, de-dollarization could mean greater economic independence and less exposure to U.S. policy risks. However, no currency currently matches the dollar’s liquidity, stability, and global recognition, so a full transition is unlikely in the near future .
Summary
De-dollarization is a complex, ongoing process that reflects a gradual shift away from the global dominance of the U.S. dollar. It involves diversifying reserves, using alternative currencies and assets, and creating new financial systems to reduce dependence on the dollar.
Driven by geopolitical tensions and the rise of emerging economic powers, de-dollarization challenges the entrenched role of the dollar but is unlikely to completely replace it anytime soon.
Instead, it is leading to a more multipolar monetary system in international finance, increasing demand for alternative investments to the U.S.
Technical task
The main technical chart is presented in a quarterly breakdown, reflecting the dynamics of the Canadian dollar against the US dollar
CADUSD in the long term.
With the continued positive momentum of the relative strength indicator RSI(14), flat support near the level of 0.70 and a decreasing resistance level (descending top/ flat bottom) in case of a breakout represent the possibility of price growth to 0.80, with the prospect of parity in the currency pair and strengthening of the Canadian dollar to all-time highs, in the horizon of the next five years.
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Best wishes,
Your Beloved PandorraResearch Team 😎
- The US market dominance has been largely driven by the rapid rise of tech giants (such as Apple, Microsoft, Amazon and Alphabet), which have benefited from strong profit growth, global market reach and significant investor inflows.
- Unsatisfactory International Performance
Markets outside the US have faced headwinds including multiple stifling sanctions and tariffs, slowing economic growth, political uncertainty (especially in Europe), a stronger US dollar and the declining influence of high-growth tech sectors. - The Valuation Gap
By 2025, US equities will be considered relatively expensive compared to their international peers, which may offer more attractive valuations in the future.
Recent Shifts (2025 Trend)
Since early 2025, international equities have begun to outperform the S&P 500, and European and Asian equities have regained investor interest. Global market currencies are also widely dominated by the US dollar.
Factors include optimism around the following three big themes.
DE-DOLLARIZATION. DE-AMERICANIZATION. DIVERSIFICATION.
De-dollarization is the process by which countries reduce their reliance on the US dollar (USD) as the world's dominant reserve currency, medium of exchange, and unit of account in international trade and finance. This trend implies a shift away from the central role of the US dollar in global economic transactions to alternative currencies, assets, or financial systems.
Historical context and significance of the US dollar
The US dollar became the world's primary reserve currency after World War II, as enshrined in the Bretton Woods Agreement of 1944. This system pegged other currencies to the dollar, which was convertible into gold, making the dollar the backbone of international finance. The United States became the world's leading economic power, and the dollar replaced the British pound sterling as the dominant currency for global trade and reserves.
The dollar has been the most widely held reserve currency for decades. As of the end of 2024, it still accounts for about 57% of global foreign exchange reserves, far more than the euro (20%) and the Japanese yen (6%). However, this share has fallen from over 70% in 2001, signaling a gradual shift and prompting discussions about de-dollarization.
How De-Dollarization Works
Countries looking to reduce their reliance on the dollar are pursuing several strategies:
- Diversifying reserves: Central banks are holding fewer U.S. dollars and increasing their holdings of other currencies, such as the euro, yen, British pound, or new alternatives such as the Chinese yuan. While the yuan's share remains small (about 2.2%), it has grown, especially among countries like Russia.
- Using alternative currencies in trade: Countries are entering into bilateral or regional agreements to conduct trade in their own currencies rather than using the dollar as an intermediary. For example, China has introduced yuan-denominated oil futures (the "petroyuan") to challenge the petrodollar system.
- Increasing gold reserves: Many countries, including China, Russia and India, have significantly increased their purchases of gold as a safer reserve asset, reducing their dollar holdings.
Developing alternative financial systems: Some countries and blocs, such as BRICS, are working to develop alternatives to the US-dominated SWIFT payment system to avoid the risk of sanctions and gain true economic and political independence.
Reasons for de-dollarization
The move towards de-dollarization is driven by geopolitical and economic factors:
- Backlash against US economic hegemony: The US often uses dollar dominance to impose sanctions and exert political pressure, encouraging countries to seek financial sovereignty.
- Rise of new economic powers: Emerging economies like China and groups like the BRICS are seeking to reduce their vulnerability to U.S. influence and promote regional integration and alternative financial infrastructures.
- Geopolitical tensions: Conflicts like the war in Ukraine have intensified efforts by countries like Russia to remove the dollar from their reserves to avoid sanctions.
Implications and outlook
While the dollar remains dominant, a more de-dollarized world is already changing global economic power. The U.S. may lose some advantages, such as lower borrowing costs and geopolitical influence. For the U.S. economy, de-dollarization could lead to a weaker currency, higher interest rates, and reduced foreign investment, although some effects, such as inflation from a weaker dollar, could belimited .
For other countries, de-dollarization could mean greater economic independence and less exposure to U.S. policy risks. However, no currency currently matches the dollar’s liquidity, stability, and global recognition, so a full transition is unlikely in the near future .
Summary
De-dollarization is a complex, ongoing process that reflects a gradual shift away from the global dominance of the U.S. dollar. It involves diversifying reserves, using alternative currencies and assets, and creating new financial systems to reduce dependence on the dollar.
Driven by geopolitical tensions and the rise of emerging economic powers, de-dollarization challenges the entrenched role of the dollar but is unlikely to completely replace it anytime soon.
Instead, it is leading to a more multipolar monetary system in international finance, increasing demand for alternative investments to the U.S.
Technical task
The main technical chart is presented in a quarterly breakdown, reflecting the dynamics of the Canadian dollar against the US dollar
CADUSD in the long term.With the continued positive momentum of the relative strength indicator RSI(14), flat support near the level of 0.70 and a decreasing resistance level (descending top/ flat bottom) in case of a breakout represent the possibility of price growth to 0.80, with the prospect of parity in the currency pair and strengthening of the Canadian dollar to all-time highs, in the horizon of the next five years.
--
Best wishes,
Your Beloved PandorraResearch Team 😎
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.