NEW DELHI– A growing number of countries are using their national currencies to settle international trade transactions, potentially reducing reliance on the US dollar and gradually reshaping the global financial system, according to a new report.
The shift toward local currency transactions is gaining momentum across Asia, Europe, Africa and Latin America as governments seek to lower transaction costs, manage currency risks and reduce exposure to geopolitical uncertainties, according to an article published by India Narrative.
Asia has emerged as a major center for local currency transaction arrangements, with Indonesia expanding its network of trading partners that conduct cross-border business without relying exclusively on the US dollar.
Indonesia’s local currency transaction partners include Malaysia, Thailand, China, Japan, South Korea and the United Arab Emirates. The country is also pursuing similar arrangements with additional trading partners.
According to Bank Indonesia, transactions conducted under its local currency framework reached the equivalent of $49.4 billion during the first eight months of 2026, compared with $25.7 billion for all of 2025.
The figures indicate a significant acceleration in the use of local currencies, with transaction volumes through August 2026 approaching twice the total recorded during the previous year.
China is also working to expand the international use of its currency, the renminbi, through bilateral trade agreements and cross-border payment infrastructure.
Meanwhile, members of the BRICS grouping are exploring mechanisms to increase the use of national currencies in trade among participating economies.
Similar initiatives are developing in other regions. The euro has become an established currency for trade within Europe, while Latin American countries have long maintained bilateral and regional payment arrangements.
In Africa, the Pan-African Payment and Settlement System has been established to facilitate cross-border transactions using local currencies, reducing the need for businesses to rely on intermediary foreign currencies.
The report identifies several economic and geopolitical factors behind the growing interest in alternatives to dollar-based trade settlements.
Using national currencies can reduce transaction expenses by eliminating some currency conversions. Such arrangements may also help companies manage foreign-exchange exposure, although their effectiveness depends on currency liquidity and exchange-rate fluctuations.
Geopolitical developments have provided another incentive for governments to diversify their payment systems. Trade disputes, financial sanctions and uncertainty surrounding economic policies in major economies have increased interest in alternative settlement arrangements.
The trend could eventually have implications for the United States, whose currency remains central to international trade and finance.
As more countries settle bilateral transactions directly in national currencies, demand for the US dollar in certain segments of international commerce could gradually weaken, the report suggests.
Over time, reduced demand for dollars in trade settlements could also affect international investment patterns, including demand for US Treasury securities.
Such developments could potentially diminish some of the economic and financial advantages the United States derives from the dollar’s dominant position in the global monetary system.
However, the report presents these changes as a gradual evolution rather than an immediate displacement of the US dollar, with local currency arrangements providing countries greater flexibility in managing their international economic relationships. (Source: IANS)
