Will BRICS Currency Affect the U.S. Dollar?

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Source Credit : Portfolio Prints

Introduction

The BRICS nations — Brazil, Russia, India, China, and South Africa — have announced moves toward creating a new common currency for trade and commerce. The goal is to reduce reliance on the U.S. dollar, which has long dominated global trade. But will this BRICS currency affect the dollar’s status? Let’s explore.

The U.S. Dollar in Context

• The dollar has dominated global commerce for decades.




• As of 2023:

• 60% of global foreign reserves were held in U.S. dollars.


• 88% of global Forex trades involved the dollar.


• The dollar accounted for roughly 41.7% of SWIFT international payments.

BRICS and Its Growing Role

• BRICS nations combined:



• Represent ~41% of the world’s population.


• Account for roughly 32% of global GDP (PPP).


• Control roughly 18% of global trade.



• New member nations like Saudi Arabia, UAE, and Egypt Haved also Joined in 2024.

Will a BRICS Currency Impact the U.S. Dollar?

1. Trade

• BRICS nations account for roughly 18% of global trade.


• A BRICS currency for intra-bloc trade could reduce dollar usage by roughly 5–8% over the next 5–10 years.

2. Reserve Holdings

• The dollar comprises roughly 60% of global reserves.


• A shift of 5–10% towards BRICS currency would reduce dollar reserves to roughly 54–57%.

3. Geo-Political Significance

• BRICS nations are resource-rich (oil, gas, rare earth minerals).


• Settling commodity trades in BRICS currency can challenge the petrodollar dominance.

Potential Impact Simulation In Table

Year	U.S. Dollar in Trade (%)	BRICS Currency in Trade (%)
2023	88%	0%
2026	85%	3%
2028	80%	8%
2030	75%	12–15%

Data By : Portfolio Prints

Potential Impact Simulation In Chart

Data By : Portfolio Prints

Will the BRICS Currency Replace the Dollar?

• Short-Term: No. The dollar will remain dominant due to its liquidity, trust, and institutional backing.


• Medium- to Long-Term: BRICS currency can carve out a significant niche in global trade, especially in energy and commodity markets.


• Potential Outcome: A multi-currency world where the dollar and BRICS currency coexist, akin to the dollar–euro–yuan balance.

Overview

The BRICS currency initiative is significant and will affect the global financial order, although it will not completely dethrone the dollar soon. It will:

• Reduce the dollar’s share of global trade and reserves.


• Create a more balanced global commerce.


• Enhance BRICS nations’ economic sovereignty.