The global foreign exchange market conducts transactions worth $7.5 trillion a year, according to the Bank for International Settlements latest triennial survey. The US dollar takes the majority of the share, with 88% of all foreign exchange transactions being settled in it. Therefore, the usage of the USD in foreign exchange transactions is $6.6 trillion, which BRICS is aiming to overtake.
On the other hand, BRICS member China’s local currency, the yuan, is used in only 7% of all global foreign exchange. The euro takes the second spot at 30.5% of all FX transactions yearly. The sum of volume can exceed 100%, indicating how often each currency is used on either side of a trade.
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BRICS Falters in the Foreign Exchange Market, No Match for the USD
The development indicates that the BRICS alliance must position their local currencies to be used more than $6.6 trillion in the foreign exchange markets to outperform the USD. This is simply impossible as the bloc cannot sustain or handle this many FX transactions, even if they try harder.
Business entities and individuals in the US and the West do not accept local currencies for trade and cross-border transactions. The US dollar, the euro, and the pound are the default currencies in the markets. BRICS will find it harder to penetrate the foreign exchange sector, which is solely dominated by leading Western currencies and the USD.
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While the Chinese yuan makes it to the top 10 list, other BRICS currencies are nowhere compared to the USD. They are used less than 2% in all foreign exchange settlements, standing no chance to compete against the greenback. The Benjamin is the de facto currency despite the alliance pushing de-dollarization in their trade deals. If they launch a new currency, settling 88% of FX transactions could take decades, even if it happens.