Policies to Promote Local Currency Use in Intra-regional Trade and Investment in East Asia
Under the Bretton Woods system established in 1944, the U.S. dollar was made the global reserve currency convertible to gold, underlining post war U.S. economic dominance. Even after the Nixon shock that ended US$-gold convertibility and triggered the collapse of the Bretton Woods system in early 1970s, the U.S. dollar has remained the dominant currency for denominating trade and investment globally, including within East Asia.The dominance of the US$ is not just limited to trade and investment between the U.S. and its trading and investment partners, but also in transactions among third parties in which the U.S. is not involved, including within East Asia. For example, in 2017, 66.3% of Thai export to the EU was denominated in US$, a currency that was neither a local currency for the EU or Thailand. Similarly, 58.5% of Thai export to Japan was denominated in US$.