Global consumers and exporters of crude are now managing without dollar-denominated trade deals, the Wall Street Journal reported this week, citing the head of global commodities strategy at JPMorgan Chase, Natasha Kaneva.
The report comes a day after Iran and Russia, two of the world’s leading oil exporters, said they have finalized an agreement to trade in their national currencies instead of the US dollar. Moreover, the sanction-hit states have found buyers for their commodities in China and India, selling them at a generous discount.
“The US dollar is getting some competition in commodities markets,” Kaneva told the journal, emphasizing that the share of the world’s oil traded in other currencies has increased to nearly 20%.
The trend is less obvious when it comes to other commodity-selling majors. However, some of them, including Brazil, the UAE, and Saudi Arabia, have taken some steps to prepare the groundwork for trade that bypasses the greenback.
According to data tracked by JPMorgan, twelve major commodities contracts have been carried out in non-dollar currencies in 2023 versus just seven last year, and only two scored in 2015 through 2021.
The data relates to physical commodity deals rather than futures trading in financial markets. This year, non-dollar contracts were reportedly settled by sellers in Russia, with just one case registered in the UAE.
Earlier this year, India and the UAE signed a deal on local currency trading. A refiner in India bought the first shipment of Emirati crude in rupees. Brazil and China have also conducted their first local-currency commodity transaction for a shipment of Brazilian pulp.
Last month, China and Saudi Arabia signed a local currency swap agreement worth 50 billion yuan ($7 billion) to strengthen financial ties and expand the use of local currencies between the nations.
The share of the dollar in all trades in foreign exchange markets is reportedly hovering around 88%, which makes the US currency broadly dominant in global trade and finance.
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