Russia and China have begun trading oil using the Chinese yuan instead of the US dollar.

 Friday 17 April 2026

Russia announced this week that its bilateral trade with China has almost completely moved away from using the U.S. dollar, highlighting the two countries’ commitment to reducing their reliance on the U.S.-led economic system.

Russia and China have begun trading oil using the Chinese yuan instead of the US dollar. This shift is part of a broader trend where both countries are seeking to reduce their dependence on the US dollar, especially in the context of geopolitical tensions and sanctions. The yuan is increasingly used for oil transactions, reflecting a move towards a more diversified currency system in global trade.

The US dollar is no longer backed by gold. It was officially transitioned to a fiat currency in 1971, meaning its value is derived from the government's ability to generate revenue and its authority to compel economic participants to transact in dollars. Historically, the dollar was backed by gold until the gold standard was abandoned, and today, its value rests on trust, economic strength, and institutional mechanisms rather than any physical commodity.

The world trades in U.S. currency because the U.S. dollar is the world's primary reserve currency. This means that countries hold U.S. dollars as a safe-haven asset during economic uncertainty, and they use U.S. dollars to conduct international trade and finance. The dollar's strength affects the global gold market, with a stronger dollar typically leading to lower gold prices and a weaker dollar leading to higher gold prices. This inverse relationship is due to the fact that gold is priced globally in U.S. dollars, and when the dollar strengthens, gold becomes more expensive for buyers using other currencies, reducing demand. Conversely, when the dollar weakens, gold becomes cheaper internationally, increasing demand.

The United States needs the world to trade in its currency for several reasons:
Global Reserve Currency: The U.S. dollar is the world's primary reserve currency, held by central banks worldwide. This gives the U.S. the ability to print dollars and exchange them for real goods and services from the rest of the world.

Oil Pricing: Oil is priced and traded globally in U.S. dollars, creating a constant global demand for the U.S. currency.

International Trade: The U.S. dollar is the dominant currency for international trade, and assets held in dollars are seen as a superior store of value when countries face instability.

Financial Stability: The U.S. dollar's strength is reinforced by the size of the U.S. economy, the stability and transparency of U.S. government and economic institutions, and an independent central bank that credibly balances maximum employment and price stability.

The U.S. dollar's dominance in global trade and finance is a result of its historical and economic advantages, which have shaped the global economy for decades.

1971 Gold Dollar Brake Up
The Nixon Shock was a pivotal moment in economic history that led to the end of the gold standard and the establishment of the petrodollar. On August 15, 1971, President Richard Nixon announced the suspension of the dollar's convertibility to gold, effectively ending the Bretton Woods system. This unilateral decision was a response to rising inflation and the potential for a currency crisis. The move led to the dollar becoming a fiat currency, valued not by gold reserves but by the faith and military power of the United States. The consequences of this decision had a profound impact on global finance, trade, and economic policy, reshaping the global economy and setting the stage for the era of fiat currencies.

The gold standard was a monetary system tying the value of a country’s currency directly to gold. It helped countries maintain fixed exchange rates and facilitated international commerce. The Bretton Woods Agreement shaped its evolution, pegging major currencies to the U.S. dollar. President Nixon’s decision to end the dollar’s convertibility to gold in 1971 effectively ended the gold standard. This transition led to the modern fiat currency system, where money is backed by government trust rather than physical commodities, influencing today’s U.S. dollar value and monetary policy.

America prints its own currency, specifically the U.S. Dollar. The Federal Reserve, as the central bank, manages the money supply and regulates the issuance of currency. While the U.S. does not print unlimited money, it has the authority to expand its money supply, which is managed through monetary policy and open market operations. The U.S. dollar is a unique global reserve currency, allowing it to maintain its value and influence despite the printing of currency.

Is De-Dollarization Coming?
The good news for Americans is that the value of the dollar has held up well in recent years, despite growing U.S. debt and inflation. But while the U.S. Dollar Index is up 7.2% overall in the past five years, it has dropped 4.4% in the past year.

Trump's aggressive policies may be driving the dollar's recent weakness, or it may be that global investors are simply losing faith in the long-term outlook for the U.S. economy.

Fortunately for Americans, there appears to be no viable alternative to the dollar as of yet. Gold, silver and other precious metals have been an effective hedge against inflation and delivered some excellent returns for investors in 2025 as the dollar slumped. However, metals are unlikely to replace the dollar as a global reserve currency due to challenges with transportation, storage, liquidity and supply. Likewise, Bitcoin and other cryptocurrencies face their own challenges with liquidity, security, scalability and energy consumption.

Instead of choosing a single alternative currency, central banks around the world have taken a more diversified approach, incorporating currencies of smaller economies such as Australia and Canada.

Usha Haley, Barton distinguished chair in international business at Wichita State University, says the dollar is not imminently at risk of losing its status as a global reserve currency, but it is facing creeping regional displacement if global investors begin to question the U.S. government's stability.

"U.S. politics do not really affect the dollar's reign as our institutions and our economy are seen as strong and enduring," Haley says.

"The more erratic and idiosyncratic U.S. economic governance appears, the greater the long-term risk of the dollar's gradual fragmentation rather than abrupt displacement."

Dr. Hamid Malakpour, professor and interim dean of Malcolm Baldrige School of Business at Post University, says the recent U.S. actions to overthrow the Nicolas Maduro regime in Venezuela may ultimately help support the dollar's reserve currency status.

"Venezuela's large oil reserves returning to global markets can increase supply, reduce oil prices and ease inflationary pressure," Malakpour says.

"Additionally, re-engagement creates an opportunity to bring oil trade back into dollar-based settlement, which supports, rather than weakens, the dollar's global role."

Nevertheless, investors concerned about de-dollarization can dial back exposure to U.S.-specific funds like the SPDR S&P 500 ETF Trust (ticker: SPY) and increase their allocation to funds such as the Vanguard FTSE Developed Markets ETF (VEA) and the Vanguard FTSE Emerging Markets ETF (VWO).

Investors can also diversify into non-correlated assets, such as Bitcoin (BTC), real estate, gold and certain commodities. Investors can easily invest in U.S. dollar hedges such as gold via the SPDR Gold Trust (GLD), silver via the iShares Silver Trust (SLV) and real estate via funds such as the Vanguard Real Estate ETF (VNQ). Concerns about dollar weakness have been a major contributor to the historical rally in precious metals prices, sending the GLD fund up about 46% and the SLV fund up more than 108% in the past year.

Gold's share of global foreign reserves has also risen from around 13% in 2017 to roughly 30% as of late 2025.

Mayra Rodriguez Valladares, managing principal at MRV Associates and former foreign exchange analyst at the Federal Reserve Bank of New York, says total de-dollarization would potentially be devastating for investors who aren't prepared.

"American investors, and frankly global ones, would be tremendously hurt if central banks and markets started to pull away from the dollar. The best thing that investors can do is monitor if indeed there is a movement toward de-dollarization and to diversify investments into different currencies," Valladares says.
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