Despite ongoing speculation about the potential advent of a new currency proposed by the BRICS nations—Brazil, Russia, India, China, and South Africa—U.S. Treasury Secretary Janet Yellen continues to confidently underscore the enduring strength of the U.S. dollar.
The conjecture surrounding this new currency, particularly the notion that it may be backed by gold, has done little to unnerve Yellen who firmly believes in the resilient position of the greenback in the global economy.
A firm stance on the dollar’s dominance
While her visit to China sparked an array of questions regarding the looming possibility of a BRICS currency, Yellen didn’t flinch.
Emphasizing that no current developments, including those proposed by the BRICS, could possibly threaten the dollar’s stronghold, she reiterated that almost 90% of international transactions are facilitated using the dollar.
Yellen’s robust confidence stems from the deep and liquid nature of the U.S. open capital markets, alongside the country’s robust rule of law and extensive financial instruments.
Undoubtedly, the desire for alternative currencies springs from nations striving to circumvent the potent arm of U.S. sanctions.
Despite acknowledging this, Yellen remains staunch in her belief that no foreseeable alternative could displace the dollar’s extensive use and its position as the global reserve currency.
The BRICS currency: An ambition, not an immediate reality
Even as the murmurings about a new gold-backed BRICS currency continue to swirl, representatives from the BRICS nations are seeking to clear the air.
Leslie Maasdorp, vice president and chief financial officer of the New Development Bank—also known as the BRICS Bank—clarified that any notion of creating a common currency is a medium to long-term aspiration, rather than an immediate plan.
This aligns with the BRICS member nations’ efforts to strengthen their respective national currencies, as opposed to a unified BRICS currency.
While it’s evident that the BRICS nations are exploring the use of national currencies as a buffer against the dollar’s dominance, Maasdorp was unequivocal in stating that the U.S. dollar remains the anchor currency for the BRICS Bank.
Despite recognizing the growing traction of the Chinese yuan as a trading currency, he noted it still has a long journey ahead to potentially become a global reserve currency.
Echoing Maasdorp’s thoughts, India’s External Affairs Minister, S. Jaishankar, underlined that the key focus for the BRICS nations is to strengthen their respective national currencies within the BRICS framework, rather than creating a new common currency.
He further emphasized that the BRICS Bank is not proposing the creation of a new currency. Instead, the aim is to enhance the use of local currencies of BRICS members, bolstering their ability to protect their economies from currency devaluation risks, especially for those borrowing in dollars.
In essence, while the chatter of a new BRICS currency persists, the U.S., with its robust dollar and robust financial system, remains unfazed.
Despite the evolving global financial landscape, the U.S. dollar’s reign appears safe for the foreseeable future, backed by a deep-rooted confidence that even a BRICS currency cannot shake.
A long road remains for any global shift to alternate currencies, further cementing the dollar’s dominance and the U.S.’s unflappable confidence.
