The Rise of the BRICS Currency: Fact or Fiction?
De-dollarization is the buzzword of the year. Can a coalition of emerging markets truly challenge the US Dollar's hegemony?
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By sarah-jenkins
Financial Analyst
The US Dollar has been the world’s reserve currency since Bretton Woods. It oils the gears of global trade. But geopolitical tensions have led nations like Brazil, Russia, India, China, and South Africa (BRICS) to explore alternatives.
The Argument for De-Dollarization
Using the dollar as a weapon (sanctions) has spooked some nations. They want a currency system that is neutral and not controlled by Washington.
The Hurdles
- Trust: Investors flock to the dollar in crises because they trust US institutions. Would you store your life savings in a currency managed by competing geopolitical rivals?
- Liquidity: The US bond market is the deepest and most liquid in the world. There is no alternative place to park trillions of dollars safely.
- Trade Imbalances: For a common currency to work, trade flows need to be somewhat balanced, which is not the case among BRICS nations.
Conclusion
While we may see a multi-polar world with more bilateral trade settled in Yuan or Rupees, the Dollar’s dethroning is likely decades away, not years.