De-dollarisation: what trade is paid in, what reserves are held in, and what it changes for a portfolio

De-dollarisation is not the disappearance of the dollar but the splitting of its former functions among other currencies and instruments. The dollar was at once the currency in which contracts were priced, the currency of payment, the reserve currency and the currency of savings — and these layers are receding at different speeds and for different reasons. For an investor the practical meaning comes down to one thing: currency risk is partly replaced by infrastructure risk, and the range of available instruments narrows to those that settle inside the country. Everything else follows from that.

Separate the layers, or the discussion is pointless

The phrase "settlements have moved into national currencies" almost always describes only the currency of payment. The price, meanwhile, may remain tied to a dollar benchmark: oil, metals and fertilisers are quoted on global venues, and changing the currency of the transfer does not change the base from which revenue is calculated. The exporter receives yuan or rupees, but its income is still a derivative of the dollar price of the commodity and the rouble's exchange rate against the dollar. That is why de-dollarising settlements does not, by itself, reduce the sensitivity of financial statements to the dollar — this is visible in the revenue structure shown in company reports.

The second layer is the currency of reserves and the currency of state savings. Here the motive is not commercial but legal: an asset recorded in a foreign jurisdiction can be frozen by a decision of that jurisdiction. Reserves shift towards gold and the currencies of countries that will not take such a decision, while budget mechanisms are rebuilt around the currencies that are available for real transactions.

The third layer is the savings of private individuals. It is the slowest: the habit of holding dollars lasts longer than the ability to do so.

Why the move to national currencies runs into convertibility

The mechanism that breaks the idyll of "we trade in our own currencies" is the asymmetry of trade flows. If a country sells more than it buys, it accumulates the partner's currency with nowhere to put it: capital controls prevent it from being invested inside the issuing country, and the narrowness of the market prevents it from being taken out and exchanged. The dollar solved this problem by being accepted everywhere; a currency with a restricted capital account does not work that way.

Hence the secondary arrangements: settlements through clearing with netting of mutual claims, payments in the currency of a third country, use of the partner's currency to pay for imports from that same country, and discussion of settlements in central bank digital currencies. Each of them reduces dependence on correspondent accounts in an unfriendly jurisdiction and at the same time raises the cost and the duration of a payment. Conversion costs are precisely the price of de-dollarisation; that price is real and it is paid by the exporter, the importer and the end buyer.

What has changed in the instruments available to a Russian investor

After the restrictions of 2022 the logic became this: currency exposure is possible, but settlement takes place inside the country. This is how replacement bonds are built — the obligation is linked to a foreign currency, while payments are made in roubles at the Bank of Russia exchange rate. Yuan-denominated issues and some exchange-traded funds are built the same way. The point is that the investor gets protection against a weaker rouble without depending on a payment chain outside Russian infrastructure. The available issues and their terms are easiest to review in the bonds section, and their rouble alternative in the OFZ segment.

It is important, however, to be clear about what exactly you are buying. A currency link is not the same thing as a foreign-currency asset: the credit risk remains Russian, and settlement at a domestic rate adds the risk of the very mechanism by which that rate is set. Units of funds that invest in foreign-currency assets carry the same feature — the composition and the method of settlement are worth checking in the fund data.

What de-dollarisation does not do

It does not remove currency risk; it changes its composition: instead of a single currency the investor gets a basket of currencies, each with its own interest rates, its own inflation and its own central bank policy. It does not protect against a weaker rouble — only an asset linked to something other than the rouble does that. It does not make the market deeper: the fewer currencies in circulation, the wider the spreads and the more expensive it is to get in and out.

For the equity market the effect comes through revenue and logistics: a change in contract currency alters the timing of cash receipts, the amount of working capital and the exchange differences in the accounts. It makes sense to look at this issuer by issuer in the list of stocks, rather than through general reasoning about the exchange rate.

How to follow the process

De-dollarisation is not an event with a date but a set of decisions: changes in currency legislation, the structure of reserves, new issues in settlement currencies, foreign trade statistics. Useful reference points are the news flow, the regulator's meetings and placement dates in the events calendar, and definitions of disputed terms in the glossary.

An honest caveat: the specific shares of currencies in settlements and reserves are deliberately not given here. These are statistics published by the regulator, with their own release schedule and revisions, and any figure quoted in the text would be out of date before you read it. The right order is to understand the mechanism first, and then plug into it the current value from the primary source.