The Association of Southeast Asian Nations (ASEAN) is spearheading a regional drive to reduce dependence on the U.S. dollar, laying out ambitious plans to enhance the use of local currencies in trade and investment.
The newly unveiled ASEAN Economic Community Strategic Plan 2026–2030 signals a definitive pivot toward local currency settlements (LCS) as a primary means of shielding regional economies from external exchange rate shocks. The plan promotes regional payment connectivity and the gradual phasing out of dollar-dominant practices in cross-border transactions.
“The de-dollarization shift in ASEAN is not just ideological; it’s pragmatic,” said Abhay Gupta, Asia fixed income and FX strategist at Bank of America. “The FX deposits accumulated since 2022 are being converted back to local currencies, showing both investor intent and governmental support.”
The move comes in the wake of mounting concerns about the dollar’s use as a geopolitical instrument. According to Barclays’ Mitul Kotecha, recent months have clarified how the dollar has been “used as a sort of weapon” — especially through sanctions and trade policies.
The strategic shift is supported by a range of countries within the ASEAN+3 bloc, which includes China, Japan, and South Korea alongside the 10 ASEAN member nations. As of late 2023, over 80% of trade invoices in this bloc were still conducted in U.S. dollars, but that figure is poised to decline steadily.
ASEAN’s strategy mirrors the wider de-dollarization initiatives also gaining traction among BRICS countries. China continues to advocate for yuan-based trade settlements, while countries like India and Russia are exploring alternative mechanisms to SWIFT, the international dollar-based payment system.
Lin Li, head of global markets research for Asia at MUFG, believes the shift will reduce FX risks and encourage greater monetary autonomy. “The LCS framework and rising hedging activity are strong indicators that ASEAN wants to establish financial sovereignty in the face of global volatility,” she said.
While the U.S. dollar remains entrenched in global trade and reserves, ASEAN’s collective move could reshape intra-regional trade and investment behavior for years to come.
