New Delhi, October 28, 2026 (Yes Punjab News)
An increasing number of countries are adopting local currencies for cross-border trade instead of relying exclusively on the US dollar, a trend that could gradually influence the dollar’s dominant position in the global financial system, according to a new report.
The use of local currencies in international transactions continues to expand, with Asia emerging as one of the most active regions in developing local currency transaction (LCT) arrangements.
According to an article published by India Narrative, Indonesia has established LCT partnerships with Malaysia, Thailand, China, Japan, South Korea and the United Arab Emirates, while cooperation with additional countries is also being developed.
Bank Indonesia reported that transactions under its LCT framework reached the equivalent of $49.4 billion through August 2026, compared with $25.7 billion during the whole of 2025. This means the transaction value recorded in the first eight months of 2026 had already approached twice the previous year’s total.
Beyond Southeast Asia, China is promoting the internationalisation of the renminbi through bilateral trade cooperation and cross-border payment systems. BRICS members are also exploring the use of national currencies to facilitate trade among participating countries, the report noted.
In Europe, the euro plays a significant role in intra-European trade and economic integration. Latin America has a long history of regional trade and local payment arrangements, including bilateral and regional mechanisms.
Meanwhile, Africa has developed the Pan-African Payment and Settlement System (PAPSS) to facilitate cross-border payments using local currencies, providing an alternative to conventional payment routes that often rely on the US dollar.
The report identifies several factors behind the growing interest in local currency transactions. One key advantage is the potential to reduce currency conversion costs by limiting the need to route payments through the dollar.
Local currency arrangements may also help businesses manage certain foreign-exchange risks. However, the extent of these benefits depends on market liquidity, exchange-rate movements and the currencies involved in a transaction.
Geopolitical considerations and the pursuit of greater economic resilience are also encouraging countries to diversify their currency arrangements. Trade tensions, financial sanctions and uncertainty over the policies of major economies have prompted governments to explore greater flexibility in managing international trade and financial relationships.
The expansion of local currency transactions is therefore not simply an effort by some countries to reduce their dependence on the US dollar. It also has potential strategic implications for American economic interests.
If more countries settle bilateral trade in their national currencies, demand for US dollars for international transactions could gradually decline in certain segments of the market, the report observed.
Over the longer term, such changes could influence global demand for US financial assets, including Treasury securities, and potentially reduce some of the advantages the United States derives from the dollar’s dominant international role.
However, the growing use of local currencies does not necessarily signal an immediate decline in the dollar’s overall global importance. The long-term impact will depend on the scale of adoption, the availability of liquid financial markets and the willingness of businesses and governments to use alternative currencies for international payments.
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