Predictions of the US dollar’s imminent demise have become a recurring feature of global commentary. Yet the reality is more prosaic and interesting. The dollar remains the world’s dominant currency, even as it faces genuine pressures from a more fragmented global economy, shifting geopolitics, and deliberate efforts by some states to reduce reliance on it. What we are witnessing is not de-dollarisation in the dramatic sense, but gradual diversification within a system that still overwhelmingly favours the greenback. The numbers tell a nuanced story. The Dollar Index fell 10.7 per cent in the first half of 2025, its steepest decline in over five decades, before stabilising around 99 in early 2026. That drop reflected a combination of US monetary easing, political uncertainty, and investor repositioning rather than a wholesale loss of confidence. Even after the slide, the dollar continues to underpin roughly 80pc of global trade finance and close to 57pc of official foreign exchange reserves. Monetary policy played a central role in last year’s volatility. In 2025, the Federal Reserve (Fed) cut interest rates three times, bringing the policy rate to a 3.5–3.75pc range as the labour market cooled. By January 2026, job creation had slowed to 50,000 new positions, below expectations, though unemployment edged down to 4.4pc. Markets are now pricing in further rate cuts this year, reducing the dollar’s yield advantage. At the same time, core inflation has remained stubbornly high, complicating the Fed’s task and injecting uncertainty into global capital flows. Bond markets added to the puzzle. In mid-2025, the dollar weakened even as 10-year treasury yields rose by around 30 basis points — an unusual divergence that unsettled investors. While yields later stabilised near 4.2pc and helped the dollar recover, rising US fiscal deficits fuelled record speculative bets against the currency. By June 2025, net short positions reached roughly $47 billion. Multinational firms felt the strain too, with earlier dollar strength shaving an estimated 6–8pc off overseas earnings before the currency’s subsequent decline eased import costs but hurt exporters. Recent US legislation has further legitimised instruments like cryptocurrencies, strengthening the greenback’s presence in digital finance Gold’s surge offered another signal of anxiety. Prices climbed to around $4,500 per ounce in 2025 and then rose further to fresh record highs in January 2026, accompanied by a sharp rally in silver, which also reached multi-year peaks. The twin surge underscored deepening inflation fears, geopolitical risk, and the dollar’s long-term erosion in purchasing power. Since 2000, the dollar has lost roughly 40pc of its real value. Central banks responded by accelerating gold purchases — around 2,500 tonnes annually — pushing gold’s share of global reserves to levels last seen in the 1990s. This shift reflects hedging rather than abandonment: precious metals are being used to diversify risk, not to replace the dollar as the anchor of the global system. Geopolitics has added further strain. The Trump administration’s tariffs on BRICS countries — Brazil, Russia, India, China and South Africa, among others — contributed to the dollar’s over 9pc fall in 2025, its worst annual performance in a decade. Supply chain disruptions and legal challenges to the tariffs increased uncertainty and encouraged some countries to settle trade in non-dollar currencies. Similarly, the extensive use of financial sanctions — most notably the freezing of Russian assets after the Ukraine invasion — has prompted targeted states to seek alternatives. By mid-2024, as much as 38pc of Russia’s trade was reportedly conducted in Chinese yuan. These actions have had measurable, if gradual, effects. The dollar’s share of global reserves slipped to about 57.8pc by the end of 2024, down from roughly 70pc at the turn of the century. Some projections suggest it could fall further over the decade. Yet there is no evidence of a sudden flight from US Treasuries or a viable replacement currency ready to assume the dollar’s role. The BRICS bloc looms large in this debate. Now representing over 40pc of the world’s population 40pc of the global economy as of 2024, the group has promoted local-currency trade, expanded use of the yuan, and explored alternative payment systems. The New Development Bank aspires to challenge Western-led institutions, and discussions of gold-linked units or shared platforms have gained attention. Still, internal differences, limited financial depth, and governance issues constrain BRICS’ ability to offer a true substitute for the dollar-centric system. Payment infrastructure tells a similar story. The dollar remains involved in roughly half of all SWIFT transactions. China’s CIPS network and multilateral experiments such as mBridge are growing, but they still account for a small fraction of global flows. Even in commodities, where diversification is most visible, around 80pc of global oil trade remains dollar-denominated, despite some bilateral deals in yuan or local currencies. Ironically, cryptocurrencies are reinforcing the dollar’s reach rather than undermining it. Dollar-backed stablecoins now account for hundreds of billions of dollars in value and trillions in transaction volumes, effectively digitising the greenback and extending its use into new markets. Recent US legislation has further legitimised these instruments, strengthening the dollar’s presence in digital finance. The conclusion is clear. The dollar is under pressure, but it is far from dethroned. Diversification is real and accelerating, yet it reflects risk management in a multipolar world rather than a collapse of confidence. For the United States, the challenge is strategic, not existential: maintain institutional credibility, manage fiscal risks, use financial power judiciously, and embrace innovation rather than resist it. If Washington adapts wisely, the dollar’s central role will endure — even in a more contested global landscape. The writer is the former head of Citigroup’s emerging markets investments and author of ‘The Gathering Storm’. Published in Dawn, The Business and Finance Weekly, January 19th, 2026