US dollar may lose dominance due to Russian sanctions: IMF
The IMF’s first deputy managing director Gita Gopinath pointed out that small currency blocs may emerge based on trade between certain groups of states.
Sanctions implemented by Western countries against Russia might split the global financial system and erode the US dollar's supremacy, according to Gita Gopinath, the IMF's first deputy managing director.
According to Gopinath, drastic restrictive measures adopted by Western countries following Russia's special operation in Ukraine may lead to the formation of tiny currency blocs based on commerce between certain groupings of states.
Speaking to the Financial Times, Gopinath expressed that "We are already seeing that with some countries renegotiating the currency in which they get paid for trade."
The director added that "The dollar would remain the major global currency even in that landscape but fragmentation at a smaller level is certainly quite possible."
The US and its western allies have imposed strict and harsh sanctions on Russia following its military operation in Ukraine.
Sanctions have included restrictions on the Russian central bank, export control measures, SWIFT cutoff for select banks, and closure of airspace to all Russian flights. Many of their companies have suspended their Russian operations.
Over 1,000 Russian individuals and businesses have so far been sanctioned by the US, UK, and the EU.
The USD exchange rate declined in favor of the Russian ruble, trading at 90 rubles during Monday trading on Moscow Exchange for the first time this month. On the other hand, the euro dropped below 98 rubles for the first time since the end of February, trading data suggested.