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US must expect gradual decline in dollar's share of global reserves: Yellen

US Treasury Secretary Janet Yellen

US Treasury Secretary Janet Yellen says Washington should expect a gradual decline in the dollar's share of the global reserve, as the global de-dollarization move is gaining momentum.

Yellen made the remarks during a US House Financial Services Committee hearing on Tuesday, in response to questions about the risk of de-dollarization fueled by an increase in US sanctions.

"We should expect over time a gradually increased share of other assets in reserve holdings of countries — a natural desire to diversify," she said.

Yellen further acknowledged that the use of sanctions has motivated some countries to look for currency alternatives. However, she claimed, no alternatives exist that could completely displace the greenback, stressing that “the dollar is far and away the dominant reserve asset."

“We have deep liquid open financial markets, strong rule of law and an absence of capital controls that no country is able to replicate. It will not be easy for any country to devise a way to get around the dollar," she said.

Yellen also voiced concern over the US debt ceiling crisis, saying it undermines global faith in the nation's ability to meet its debt obligations, deteriorating the greenback's reputation.

Her comments come amid growing efforts by different countries to ditch dependency on the US dollar and to trade with their own national currencies.

All indicators show the amount of US dollars held in reserves by non-US central banks has fallen to its lowest level.

The weaponization of the US dollar, not to mention the imposition of US sanctions on perceived adversaries, has made other countries wary of utilizing the greenback in their financial transactions.

Thus, countries such as Iran and Russia are moving towards the elimination of the dollar altogether.

China, a major ally of Iran and Russia, and other major economies in Asia, including India and Malaysia, have declared their support for such de-dollarization projects.

The de-dollarization move was fast-tracked when the US Treasury Department decided to confiscate Russia's US dollar foreign exchange reserves.

This has caused other countries to reconsider keeping their financial reserves in US dollars and to conclude that their country could be the next to be harassed and vilified if it does not abide by US foreign policy. They could face secondary sanctions at the very least.

Many international organizations have also intensified their multilateral discourse on the subject, which is highly significant since the US has fallen out of favor with so many countries, most of which are gravitating eastward or away from the US.

The BRICS group of nations has also been discussing the development of a BRICS-specific multilateral wallet and currency.

The US, the most indebted nation ever, also has a sovereign debt crisis, signaling that we may be heading toward the collapse of the US dollar.

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