Challenging the Dominance of the U.S. Dollar: Economist’s Perspective on a Common BRICS Currency
The chief economist of South African financial services firm Nedbank, Nicky Weimar, recently shared her analysis on how a common BRICS currency could challenge the dominance of the U.S. dollar.
The BRICS group, consisting of Brazil, Russia, India, China, and South Africa, aims to create a reserve currency to reduce dependence on the USD. Weimar emphasized that achieving this goal requires foreign exchange reserves and the trust of the investment community as crucial factors.
She pointed out that the U.S. dollar became a global reserve currency due to the market’s trust in the backing by the Federal Reserve, which has never defaulted on its debt. On the other hand, the BRICS countries face challenges, with China being the only one in the bloc with a reserve currency but having capital controls. For a common BRICS currency to succeed, China would need significant financial liberalization to compete with the dollar and gain the trust of investors.
However, Weimar acknowledged that this journey is a long one, requiring China to let go of some control and remain committed to the path of financial liberalization.
Clever Robot News Desk 27th July 2023
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