What is Bricks Bank?
An economic partnership between several significant emerging economies, including Brazil, Russia, India, China, and South Africa, is referred to by the name BRICS. Together, they currently produce more than 25% of the global GDP and house more than 40% of the world's population. BRICS members respect geopolitical collaboration with one another, and since 2009, they have met at yearly summits. However, membership does not necessarily come with unique commercial rights or benefits.
In What Ways Do They Challenge the USD?
According to many commentators, BRICS is a response to the West's growing geopolitical power through NATO and the G7, which has grown significantly since the invasion of Ukraine. Given that Russian President Vladimir Putin recently suggested that BRICS construct a "international reserve currency based on the basket of currencies of our countries" to compete with the US Dollar in June, this purpose is very clear. This might mark the end of an era for US hegemony on the global stage if it is put into effect.
How Serious Are They About Their Plans?
According to reports, China is assisting in this new reserve currency initiative as Western sanctions on Russia mount and other BRICS nations worry about receiving the same treatment. China's President Xi Jinping has charged that the US and its allies are using economic warfare to create "a small yard with high fences." This global stance is clearly not unique, as five other nations, including Iran, Argentina, Saudi Arabia, Turkey, and Egypt, have either filed for membership in BRICS or intend to do so. Many more nations have also been formally invited. Given the tensions that exist between these nations—for example, between Iran and Saudi Arabia and China and India—this interest is particularly relevant.
How Might Major Pairs Be Affected by This?
The demand for the USD relative to other currencies may drastically decline on the foreign exchange market if such an alternative reserve currency is adopted and subsequently used to denominate many international trade transactions as the BRICS alliance expands. Given that many of the BRICS nations are major producers of oil and gas, this could potentially signal the demise of the petrodollar. This could eventually result in a significant paradigm shift for main pair fundamentals, despite the fact that these ambitious intentions are unlikely to materialize for some time.
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