Dollar's decline about to speed up, with Asia's foot on the pedal

The US dollar just isn't as desirable as it used to be. Image: X Screengrab Washington has spent the past week arguing over what the Democratic sweep of Congress means for the next two years. But few have debated what it means for the dollar. Democrats took majorities in both the Senate and the House, setting up gridlock for the rest of President Trump's final term. On that news, the dollar index slipped to its lowest level in over a month. But for the dollar's long-term future, the result barely matters. The world has been quietly reducing its dependence on the US currency for a quarter of a century, and nothing decided at the ballot box last week will stop it. Whoever controls Congress, de-dollarization has plenty of road left, and Asia is driving much of the trend. Around the turn of the century, the dollar accounted for roughly 71% of global reserves. By the end of June this year, its share had fallen to 56.70%. These are the most cautious investors on the planet, and they've been moving steadily in one direction for 25 years. They aren't simply dumping dollars to do it. In the second quarter, central banks' dollar holdings barely moved, while the euro posted the biggest gain in both holdings and share, mostly through active buying. Existing dollars stay put, but new money tends to go elsewhere. Diversification this gradual rarely makes the news, which is exactly why it will be so hard to reverse. Politics has given the trend new motivation. When Western governments froze Russia's central bank reserves in 2022, every finance ministry in the world drew the obvious conclusion: reserves held in dollars are only as secure as a country's relationship with Washington. Whatever anyone thinks of that decision, it now sits in every reserve manager's risk assessment, and it isn't coming out. US trade policy, meanwhile, keeps reinforcing the point. Two days after the midterms, the president warned that foreign companies not building factories in the US could face tariffs of up to 300%. It makes perfect sense that when access to the world's biggest consumer market can be widened or narrowed by decree, governments will naturally limit how much of their national wealth relies on the goodwill of the country printing the reserve currency. Also, there's no getting away from the fact that America's finances are adding to the pressure, with national debt now around $40 trillion. The US runs heavy deficits even in good years and leans on foreign buyers to help fund them. Anyone holding Treasuries is lending to a borrower whose debt keeps climbing and whose budget fights have shut down the government more than once. Treasuries remain safe, but holding too many of them is getting harder to defend. Then there's the shift in economic weight. The global economy has been tilting East for decades, and more and more of Asia's trade now happens within Asia. Two Asian economies trading with each other have less and less reason to route every invoice through a third country's currency, with all the cost and political exposure it brings. As ever, technology is now speeding all of this up. For generations, part of the dollar's strength has come from the payments infrastructure built around it. But rival infrastructure is going up in plain sight. At the BRICS summit in New Delhi in September, leaders mandated a payment task force to link payment and messaging systems for trade settled in local currencies. India is encouraging members to expand the use of central bank digital currencies for cross-border payments. To be sure, nobody is overtly trying to launch a single rival currency. India confirmed there was no proposal for a common BRICS currency, and the emerging bloc is better off for it. A shared currency would demand a level of trust between these governments that simply doesn't exist. Gold has been the other big winner. In 2025, gold overtook US Treasuries as a share of official reserves, largely on the back of rising prices. It carries no counterparty risk, answers to no government and a more divided world prizes both. All the same, talk of the dollar's demise is premature. The dollar was on one side of 89% of foreign exchange trades in April 2025, while the renminbi made up just 1.95% of global reserves at the end of last year. So it can be expected that the decline will be gradual, while far from smooth. In a crisis, money still runs to the dollar first. Higher US interest rates can prop up the currency for months at a time, and markets are pricing in roughly an 85% chance of a Federal Reserve interest rate hike next month. More dollar rallies like these are likely, yet none of them changes the direction of travel. Anyone with assets, income or future spending in more than one currency should expect bigger and less predictable currency swings as the system moves from one dominant currency to a multipolar version. Currency exposure, gold and real assets all carry more weight in long-term planning than they did a decade ago. Every force behind this shift is pulling in the same direction. Sanctions have taught governments that dollar reserves can be frozen, tariffs keep reminding them that access to America can be rationed and Washington's debt keeps growing regardless of who runs Congress. Meanwhile, Asia's trade increasingly stays inside Asia, the payment links to settle it are being switched on and its central banks keep buying gold. Each step makes the next one easier. The slide in the dollar's share is already there for anyone to see, but the new payment systems have barely begun to carry real volumes of trade. Once they do, the shift is likely to speed up, and Asia's finance ministries are, it can be reasonably assumed, preparing for exactly that. Nigel Green is founder and CEO of de Vere Group.