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The Recent Performance of the Dollar Draws Attention in Global Markets, with Fluctuations in the DXY, Geopolitical Pressures, and Initiatives from Emerging Countries Raising Questions About the Reach and Resilience of the Most Used Currency in International Trade.
The recent performance of the dollar has reignited the debate about its global strength. From January to the end of August 2025, the Dollar Index (DXY) has accumulated a decline of nearly 10.6%, reflecting expectations about interest rates in the U.S. and a greater appetite for other currencies.
Nevertheless, the currency remains dominant in payments and reserves, while China and the Brics are testing alternative routes.
DXY: A Barometer of Confidence
The DXY measures the dollar against a basket of currencies such as the euro, yen, and pound. On January 2, the index hovered around 109 points; by the end of August, it was around 98.
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This variation captures, on one hand, the adjustment in bets for interest rate cuts and, on the other, the impact of tougher trade policies.
Projections from banks and analysis firms pointed to further relief for the dollar throughout 2025, although with volatility.
Meanwhile, the U.S. tariff agenda is gaining weight in the scenario.
The administration of Donald Trump significantly increased tariffs and is facing legal challenges regarding the legal basis of these measures, which affect trade chains and prices of imports.
This issue could have developments until 2026, maintaining uncertainty in the exchange rate.
International Reserves: Where the Dollar Still Reigns
In the coffers of central banks, the dollar continues to be predominant.
IMF data indicates that the share of the American currency stood at about 57.8% at the end of 2024.
The euro ranks second, at about 20%, while other currencies hold smaller shares.
Even with a slight decline over the past decade, the dollar’s primacy in reserves remains solid.
Beyond volume, the liquidity of dollar assets and the depth of the Treasury market weigh heavily.
It was this ecosystem, combined with the stability of the U.S. institutions, that consolidated the dollar’s role after World War II and carried it through the end of the gold standard in 1971.
Global Payments: Leadership in Flows via Swift
In international payments, the American currency also remains ahead. In June 2025, the dollar accounted for 47.19% of payment values on the Swift network.
When excluding transactions within the eurozone, the share rises to 58.39%. The renminbi (RMB) from China stood at 2.88%, in sixth place.
The figures showcase room for diversification, but confirm the centrality of the dollar in financial infrastructure.
China and Brics: Alternatives Gain Traction, Not Hegemony
In the emerging axis, efforts are growing to <strong/liquidate commerce in local currencies and reduce costs and risks associated with the dollar.
At the Brics summit held in Rio de Janeiro in July, the countries prioritized the expansion of payment arrangements and the use of national currencies.
A common currency was not on the agenda.
The discussion included initiatives such as using the CIPS system for bilateral operations and projects from the New Development Bank in local currency.
However, the design of a unified arrangement remains distant.
On the other hand, recent episodes of sanctions, tariffs, and geopolitical shocks act as catalysts for countries to seek redundancy in settlement channels and in reserve assets.
Still, regulatory dispersion, capital market asymmetries, and capital controls in major economies limit the quick replacement of the dollar.
How the Dollar Reached the Top — and Why It Remains There
For experts, the current position results from decades-long processes.
“The American dollar became the main currency in global trade due to the economic strength of the United States, especially in the post-World War II era,” says Carla Beni, an economist and professor at FGV.
The turning point was Bretton Woods in 1944, when the currency was pegged to gold and gained the trust of governments and markets.
Even after 1971, when President Richard Nixon ended the convertibility to gold, the dollar maintained its centrality due to stable institutions, deep markets, and the creation of pillars such as the IMF and World Bank, which supported the financial architecture.
According to Carla, “all countries began to accumulate international reserves in dollars,” which gave weight and stability to the currency in the following decades.
Risk of Losing Hegemony?
The decline of the DXY in 2025 and the advancement of agendas like those of the Brics have reignited forecasts about a world with less dependence on the dollar.
However, data on reserves and payments suggests that the transition, if it occurs, is likely to be gradual.
As Carla Beni points out, “the dollar still dominates as a global reserve currency.”
She adds that the diversification process is slow because fluctuations in the dollar impact the value of other countries’ reserves.
Additionally, for another currency to assume an equivalent role, simultaneous conditions would be necessary: confidence in the economic and political stability of the issuer, liquid and deep financial markets, wide acceptance in transactions, and integration into payment networks.
Without this set, the preference for dollar assets is likely to persist.
What to Watch from Here On Out
Relevant signals will come from three fronts.
First, the trajectory of interest rates in the U.S. and its effect on the DXY and global flows.
Second, the evolution of tariffs and barriers — a topic currently at the center of American economic policy — and how this reallocates chains and currencies for invoicing.
Third, the institutional engineering of the Brics and other coalitions: success in operating interoperable systems and expanding local currency debt markets may reduce, on the margin, the demand for dollars, without eliminating it in the short term.
In summary, the dollar is undergoing a real test of resilience, not of immediate replacement.
The important question is not whether it will cease to be the anchor of the system, but how much of its share it may concede to alternatives and at what speed — given this scenario, which indicator would you monitor first: the DXY, the share of the dollar in reserves, or the advance of alternative payment systems?
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