Тhe BRICS countries are actively working on creating a single currency, a project recently confirmed by Kazem Jalali, Iran’s ambassador to Russia. This initiative aims to reduce global dependence on the US dollar and promises to disrupt the global economy if it comes to fruition. This currency could reshuffle the cards of global economic power, but also deeply impact the dollar. Here are three concrete ways the BRICS currency will affect the US dollar.
Three alarming effects of the BRICS currency on the dollar
The creation of a BRICS currency will have several significant impacts on the dollar. By adopting a common currency, the BRICS bloc members can conduct trade transactions without resorting to the US dollar. This would lead to a decrease in the supply and demand for dollars on the international stage, potentially weakening its value.
The BRICS currency could also erode the position of the US dollar as the world’s primary reserve currency. Many countries hold dollar reserves to stabilize their economies, but adopting an alternative currency could encourage diversification of these reserves. Such diversification would weaken the dollar’s dominance, thereby reducing its influence on global financial markets.
Finally, the creation of a common currency would allow BRICS countries to strengthen their local currencies. By facilitating internal trade without relying on the dollar, these economies could stabilize and enhance their own currencies. This could challenge the US dollar in forex markets, offering new competition and diversifying options for international transactions.
Towards a new world economic order?
The BRICS countries are seeking to free themselves from the grip of the US dollar by adopting a common currency. This initiative aims to reduce their dependence on the dollar, once dominant in international transactions but increasingly avoided by these emerging economies. By promoting internal trade and considering a common currency, the BRICS are striving to strengthen their economic sovereignty.
However, the success of this initiative remains uncertain. While the BRICS currency represents a challenge to the dollar, the latter has not yet had its last word. The dollar still enjoys global trust and an established financial infrastructure, making it difficult to replace.
For the BRICS alliance to achieve its goals, it will have to overcome numerous obstacles, notably gaining the trust of international investors and proving the reliability of its currency in the long term.