What BRICS Currencies and Gold Alternatives Mean for the Dollar

Joshua Ramos
US Dollar USD Greenback
Source: Adobe Image / poundsterlinglive.com

The last few months have seen de-dollarization embraced by the economic bloc in renewed fashion. Consequently, the greenback has suffered because of its fading relevance. Although it is certainly not in danger of immediate replacement as a reserve currency, what do the BRICS local currencies and gold alternatives mean for the US dollar?

The dollar has noted a sharp decline, with last week marking its largest weekly decline. Subsequently, it has edged near its 15-month low as the Federal Reserve’s July meetings are on the horizon. As macroeconomic factors have threatened the greenback, international activity certainly won’t do it any favors.

Source: scmp.com

Also Read: BRICS Sees 10 Southeast Asian Countries Dump US Dollar, Use Local Currency

BRICS Currency Development Could Add Stress to Dollar’s Status

The US dollar and the rising prominence of the BRICS economic bloc have been undeniably the stories of this year. Yet, these two things do not work independently of one another, but in reaction to one another. Specifically, the bloc’s de-dollarization campaign, embraced by the global south, has led to the falling relevance of the greenback.

However, that could only get worse in the coming months, let alone years. Specifically, there is no denying that the BRICS focus on local currencies and a gold-backed alternative could add stress to the dollar’s attempts to find its footing once again.

Source: Reuters

The upcoming BRICS summit should see a lot of vital policies come into the discussion. Indeed, the bloc has already cemented its focus on enhancing the use of local currencies. Subsequently, the yuan and rupee have seen significant increases. Therefore, it inadvertently affects the dollar, whose place within international trade has already significantly lessened.

Also Read: India to Settle Trade With UAE Using Rupee, Ditching US Dollar

Moreover, the summit should see a discussion on a gold-backed trade currency. This aspect could present yet another avenue for the dollar to decrease in use and reliance. The BRICS New Development Bank recently said that it will continue to work in the dollar, but has heavily embraced transitioning to local currencies.

Yet, as the dollar has seen its Treasury Yield tumble, the US Fed faces its vital moment. Continuing its inflation fight, what the Fed does at the end of July should have massive implications. Although it certainly can’t afford to focus on internal economic activity, it will become part of the story. Specifically, the interest rate decision could further threaten the dollar and make way for the BRICS to push it even further down.