The world’s leading bank and financial institution, JP Morgan, analyzed the de-dollarization efforts initiated by the BRICS alliance. The U.S. dollar is at risk of losing its global reserve status as BRICS countries use local currencies for trade settlement. In a recent analysis, JP Morgan predicted the future of the U.S. dollar after facing threats from the BRICS bloc. The institution studied the risk of de-dollarization across the world as other currencies look to become the global reserve.
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BRICS: JP Morgan Predicts How Long U.S. Dollar Could Remain ‘Global Reserve’
JPMorgan’s Global Research published a report titled “De-dollarization: Is the U.S. dollar losing its dominance?” Alexander Wise, who authored Strategic Research at JPMorgan, said that the Chinese Yuan is the only contender that is looking to topple the U.S. dollar.
The report outlined two scenarios that could stand a chance of eroding the U.S. dollar’s global reserve status. The first scenario is when the global financial situation turns worse, making the U.S. dollar lose stability in the markets. The second scenario could be caused by external factors outside the U.S. when other countries boost their native currencies as an alternative settlement tender.
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If other countries provide safety and security when the U.S. dollar is down, it could lead to the decline of the greenback. However, JP Morgan noted that both scenarios need to eclipse each other to challenge the U.S. dollar. These two developments need to occur simultaneously to take on the USD.
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“The first (scenario) includes adverse events that undermine the perceived safety and stability of the greenback. And the U.S.’s overall standing as the world’s leading economic, political, and military power,” the global investment bank detailed. “The second factor involves positive developments outside the U.S. that boost the credibility of alternative currencies, economic and political reforms in China, for example,” it wrote.
However, the chances of these two developments occurring on top of each other remain slim. The U.S. dollar remains the de facto supreme currency, and the Chinese Yuan comes nowhere close to threatening it. Therefore, the BRICS bloc might not dethrone the U.S. dollar anytime soon, according to JP Morgan.