The BRICS nations are looking to knock the US dollar down by setting it aside to settle international trade.
The Chinese Yuan, Russian Ruble and Indian Rupee are being used by BRICS countries in cross-border transactions. The US dollar’s dominance is declining, leading financial analysts to worry about the possibility of the dollar falling. If the situation continues, the dollar may cease to be the global reserve currency.
Will BRICS knock the US dollar down?
The US dollar dominates on a global level even though BRICS countries are trying to avoid using it. So a common currency of BRICS is about to be released and its exchange power will be tested as soon as it is launched. This coin cannot become strong in a day, as it takes years to establish trust in the system.
In addition, the new BRICS currency will not only compete with the US dollar in terms of exchange rates, but also with other currencies such as the Euro, Pound Sterling and Yen. The new tender will also be put to the test with their native currencies and face congestion from all angles.
Creating a new currency is easy, but putting it into action is difficult. Not all countries are interested in settling the trade with the new tender as it will not have the backing of another strong reserve. Although the BRICS countries are constantly buying gold to make it backed by the precious metal, the buying spree will eventually stop.
Buying more gold to support their new currency financially is not a viable and long-term option. It could deplete their reserves in the process, causing their local currency to weaken. The risk is too high for developed nations in the East to risk backing in gold, not the US dollar.
In summary, the BRICS currency may not depreciate the US dollar as it is yet to be established and proven in the market. A slight drop in value can also cause new bids to skyrocket and pose a risk to countries that accept it.