The plan for the Fed sell US dollars is becoming a reality right now, and it’s actually the first time this century that something like this is happening. The Federal Reserve is preparing to intervene in currency markets alongside Japan, and this Fed sell US Dollars move marks a historic shift in monetary policy. The intervention has triggered what many are calling a BRICS US Dollar shock. Member nations are viewing this development as validation of their ongoing BRICS de-dollarization efforts. At the time of writing, the Yen Fed coordination could also accelerate adoption of alternative currencies, and the BRICS Yuan is being positioned as one of the key beneficiaries of this shift in global currency dynamics.
Fed Dollar Moves Spark BRICS Shifts And Yen Market Volatility
Rate Checks Signal Historic Intervention
The New York Federal Reserve has just done what are being termed as infrequent rate checks with big banks and these checks targeted specifically dollar-yen positions. Such kind of action is normally considered to be the prelude to real market action. Bipan Rai, the managing director of BMO Capital Markets, said the following:
“It’s also important to note that rate checks in the past haven’t necessarily meant that intervention was imminent. But the fact that the NY Fed was asking implies that any potential intervention in dollar-yen won’t be unilateral.”
What this suggests is that when the Fed sell US dollars operation begins, it will be done in coordination with Japan rather than as unilateral action. Jason Furman, Harvard economics professor and former chairman of the Council of Economic Advisers, observed something interesting about the current situation. He stated:
“Neither US authorities or Japanese authorities seem happy about the value of the yen right now.”
The Yen Fed intervention is being designed to stabilize Japan’s currency, which has been weakening to multi-decade lows. Japanese bond yields have also been surging to levels not seen in decades, and this combination has created growing stress across Japan’s economy and also its financial system.
BRICS Seizes Opening For Currency Alternatives
The timing of this Fed sell US Dollars announcement hasn’t gone unnoticed by BRICS nations that have been advancing their BRICS de-dollarization agenda. The move is being seen as an opportunity right now by countries looking to reduce their reliance on the dollar in international trade and also in financial transactions. Russian President Vladimir Putin has explained the motivation behind these efforts in pretty straightforward terms. He stated:
“We are not refusing, not fighting the dollar, but if they don’t let us work with it, what can we do?”
Russian Finance Minister Anton Siluanov made an announcement that has caught the attention of global markets. He revealed that Russia and China have settled 99.1% of their trade payments in rubles and yuan. This means they’re bypassing dollar intermediation entirely at this point. China’s Cross-Border Interbank Payment System has been expanded significantly, and right now it includes 1,467 indirect participants across 119 countries. This infrastructure is providing the foundation for BRICS Yuan settlements. Even more, it’s allowing countries to conduct trade without needing to convert through US dollars first.
Dollar Weakness Reshapes Global Liquidity
The Fed sell US dollars plan could reshape global liquidity in ways that weren’t expected even a few months ago. When central banks decide to intervene in currency markets like this, it typically signals one thing, Normal policy tools are no longer considered sufficient. The potential for a BRICS US dollar shock has been discussed by analysts who see this as a turning point. The pressure has become too large for Japan to manage alone. This is why coordination with the Fed is being pursued right now.
Diverging Views Within BRICS Alliance
Nonetheless, not every BRICS country is on the question of de-dollarization unanimously. External Affairs Minister of India S. Jaishankar has clarified on this point and his words indicate that India may be more cautious. He stated:
“I do not believe we have any policy to have a replacement to the dollar. The dollar as the reserve currency is the source of global economic stability, and currently, the last thing we want in our world is less economic stability.”
The larger BRICS de-dollarization movement has been on the rise even though India has reservations. Russia and China are taking the frontline and they have been striving to come up with alternative payment systems that can be independent of the Western financial infrastructure. The BRICS Yuan is being positioned as a possible alternative to international settlement. This happens especially in the energy markets that have seen the petrodollar dominate over several decades.
US dollar currently constitutes less than 40 percent of the currency reserves in the world. This is actually the lowest in at least 20 years. The stockpiling of gold by central banks globally has been at levels never seen before and this, is an indication of a rising need to diversify off the dollar. The fact that Fed is selling US dollars to help bail Yen may be viewed as confirmation that currency stability needs more than mere talk at this point in time.
International Trade And Finance
Observers in the market say that in the case where the Fed sell US dollars operation is done, then it will include printing of new dollars. This means selling them in the foreign exchange market. Those dollars will be used to buy Japanese Yen. This not only strengthens the Yen but also deliberately weakens the US dollar. It is not something that is done regularly, and three times have been recorded as having been done since 1996. This was the last time in 2011 following the earthquake in Japan.
The BRICS US dollar shock which is being predicted is not necessarily about the currency values alone. It is also concerning the overall change in the conduct of international trade and finance. The Yen Fed coordination is a historic point in monetary policy. It may boost the developments that have been years in the making. Other alternative payments such as BRICS Pay and mBridge are currently in testing. They are meant to enable cross-border payments without conversion to dollars.
What This Means For Markets And Investors
For investors and also for policymakers, the implications are substantial. A weaker dollar could make US exports more competitive. However, this also means that dollar-denominated debt becomes more expensive to service for foreign borrowers. The decision to have the Fed sell US dollars to support the Yen is being made with these trade-offs in mind. The hope is that coordinated action can prevent more severe market dislocations down the road. The Fed sell US dollars strategy represents a significant departure from the hands-off approach that has characterized American monetary policy for the past two decades.