The BRICS nations are looking to take down the U.S. dollar by sidelining it to settle international trade. The Chinese Yuan, the Russian Ruble, and the India Rupee are being used by BRICS countries in cross-border transactions. The dominance of the U.S. dollar is declining making financial analysts worried about a potential USD fallout. If the momentum continues, the dollar might no longer remain to be the global reserve currency.
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Will BRICS Take Down the U.S. Dollar?
The U.S. dollar reigns supreme on a global level despite the BRICS nations trying to avoid it. The yet-to-be-released currency has no intrinsic value and its exchanging power will be put to test the minute it is launched. Currencies don’t become powerful in a day, as it takes years to establish trust in the system.
In addition, the new BRICS currency will not only take on the U.S. dollar in terms of exchange rates, but it will also compete with other giants such as the Euro, Pound, and Yen. The new tender will also be put to the test with their native currencies and face chock-o-block from all corners.
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Creating a new currency is easy, but putting it to work is not. Not all countries would show interest to settle trade with the new tender as it would have no backing from another strong reserve. Though BRICS nations are relentlessly buying gold to make it backed by the precious metal, the buying spree will eventually stop.
Adding troves of gold every month to back their new currency is financially not a viable and long-term option. It could drain their reserves in the process, making their native currency weak. The stakes are too high for the developed Eastern nations to risk backing with gold and not the U.S. dollar.
Also Read: Egypt Looking To Join BRICS & Accept the New Global Currency
In conclusion, the BRICS currency might not bring the U.S. dollar down as it is yet to be established and proven in the markets. A slight dip in value could also send the new tender spiraling and cause risk to the nations accepting it.