The US dollar may face a huge crisis from BRICS and other Asian currencies, as Stephen Jen, CEO of Eurizon SLJ Capital, revealed to Bloomberg that an “avalanche” of selling the USD worth $2.5 trillion could come from Asian countries. He revealed that Asian exporters and investors have stockpiled a large sum of USD over the years that could soon be dumped as the greenback is weakening against local currencies in 2025.
The Bloomberg currency index shows that the USD is down 8% since February, while local currencies are outperforming the reserve currency. This gives the BRICS alliance more power to initiate the de-dollarization agenda as $2.5 trillion worth of US dollar hangs on a thread. “We suspect these dollar hoardings by Asian exporters and institutional investors may be extremely large. Possibly on the order of $2.5 trillion or so. And pose sharp downside risks to the dollar vis-à-vis these Asian currencies,” Jen and Joana Freire wrote.
BRICS: US Dollar Faces a Threat of $2.5 Trillion Sell-off
BRICS and other developing countries are now in a position where their economies can afford to offload the US dollar. There is an “important imbalance in the world that puts the dollar in a vulnerable position,” said Jen. The long-term appeal of the USD is getting minimized as local currencies now seem more lucrative. It does not carry the burden of debt and strengthens each other’s GDP when two nations transact.
Apart from BRICS, de-dollarization is growing in countries like Taiwan, Malaysia, and Vietnam, where the US dollar is becoming secondary. Jen also explained that Asian countries have external surpluses, which they can hedge against the US dollar fluctuations. Read here to know how many sectors in the US will be affected if BRICS ditches the dollar completely. The American economy is at the crossroads of a global paradigm shift where its power is on the decline.