The BRICS currency is coming: Why should the dollar worry?

The BRICS countries are actively working on the creation of a single currency, a project recently confirmed by Kazem Jalali, Iranian ambassador to Russia. This initiative aims to reduce global dependence on the US dollar and promises to shake up the global economy if it sees the light of day. This currency could redistribute the cards of global economic power, but also profoundly impact the dollar. Here are three concrete ways the BRICS currency will affect the US dollar.

Three alarming effects of the BRICS currency on the dollar

The creation of a BRICS currency will have several significant impacts on the dollar. By adopting a common currency, members of the BRICS bloc will be able to carry out their commercial transactions without using American currency. This would lead to a lower supply and demand for dollars internationally, which could weaken its value.

The BRICS currency could also erode the position of the US dollar as the world's main reserve currency. Many countries maintain dollar reserves to stabilize their economies, but the adoption of an alternative currency could provide incentives to diversify these reserves. Such diversification would weaken the dominance of the dollar, thereby reducing its influence on global financial markets.

Finally, the creation of a common currency would allow BRICS countries to strengthen their local currencies. By facilitating internal trade without resorting to the dollar, these economies could stabilize and enhance the value of their own currencies. This could challenge the US dollar in foreign exchange markets, providing new competition and diversifying options for international transactions.

Towards a new world economic order?

The BRICS countries are seeking to free themselves from the grip of the US dollar by adopting a common currency. This initiative aims to reduce their dependence on the dollar, once dominant in international transactions, but increasingly avoided by these emerging economies. By promoting internal trade and considering a common currency, the BRICS seek to strengthen their economic sovereignty.

However, the success of this initiative remains uncertain. Although the BRICS currency represents a challenge for the dollar, the latter has not yet said its last word. The dollar still benefits from global trust and established financial infrastructure, making it difficult to replace.

For the BRICS alliance to achieve its goals, it will need to overcome many obstacles, including gaining the trust of international investors and proving the reliability of its currency over the long term.