De-Dollarization Takes Hold in Asia—Currency Hedging Surges to Record Highs
Asia’s de-dollarization push is gaining rapid traction as BRICS and ASEAN accelerate local-currency trade, driving currency hedging to record highs and challenging dollar dominance.
A growing trend of de-dollarization is underway across Asia as policymakers, institutional investors, and economic blocs seek alternatives to the U.S. dollar amid concerns over monetary volatility, geopolitical risk, and the strategic use of the greenback in sanctions, CNBC reported. According to International Monetary Fund (IMF) data, the dollar’s share of global foreign exchange reserves declined to 57.8% in 2024, down sharply from over 70% in 2000. This retreat has coincided with a steep drop in the dollar index earlier this year and increased investor demand for currency hedging and local-currency exposure, especially in Asia.
As part of this shift, the Association of Southeast Asian Nations (ASEAN) released its Economic Community Strategic Plan for 2026 to 2030, which calls for greater use of local currencies in trade and investment and deeper regional payment integration. The plan was endorsed during official meetings in May. Meanwhile, BRICS nations are actively promoting bilateral trade in their domestic currencies and expanding alternatives to Western-dominated systems like SWIFT. Lin Li, head of global markets research for Asia at Mitsubishi UFJ Financial Group (MUFG), Japan’s largest bank by assets, was quoted by CNBC as stating:
“De-dollarization is growing as Asian economies in particular seek to reduce reliance on the greenback in hopes of using their own currencies as a medium of exchange to reduce FX risks.”
Craig Chan, global head of FX strategy at Nomura Securities, added that “some of the high performers that we’re looking at will be places like Japanese yen, Korean won, and ### dollar.” Nomura reported that Japanese life insurers increased their hedge ratio from 44% to 48% between April and May, while ###’s hedge ratio stands at 70%.
Abhay Gupta, Asia fixed income and FX strategist at Bank of America, commented on the regional shift in behavior by deposit holders: “De-dollarization in ASEAN is likely to pick up pace, primarily via conversion of FX deposits accumulated since 2022.” Mitul Kotecha, head of foreign exchange and emerging markets macro strategy for Asia at Barclays, said the shift has taken on a strategic dimension:
“Countries are looking at the fact that the dollar has been, and can be used as a sort of weapon on trade, direct sanctions, etc… That’s been the real change.”
Francesco Pesole, a foreign exchange strategist at ING, noted political and market triggers: “Trump’s erratic trade policy decisions and the dollar’s sharp depreciation are probably encouraging a more rapid shift towards other currencies.” Still, many analysts caution that no clear replacement exists. Pesole stated: “No other currency holds the same liquidity, depth of bond and credit market as the dollar.”