IMPACT OF BRICS ON US DOLLAR

For nearly a century, the US dollar (USD) has reigned supreme as the world's reserve currency, the undisputed king of global finance. Given the recent expansion of the BRICs countries to include five new members, will the US dollar remain the world s reserve currency? Franklin Templeton Institute s Kim Catechis looks at the implications for investors.But storm clouds are gathering on the horizon, emanating from an increasingly influential bloc of nations known as BRICS (Brazil, Russia, India, China, and South Africa).These countries, representing a significant portion of the world's population and GDP, are actively seeking to reduce their reliance on the dollar and explore alternative financial systems.The implications of this shift are potentially enormous, threatening to reshape the global economic landscape and challenge the dollar's long-held dominance. How would a new BRICS currency affect the US dollar? For decades, the US dollar has enjoyed unparalleled dominance as the world s leading reserve currency. According to the US Federal Reserve, between 19, the dollar was used in 96 percent of international trade invoicing in the Americas, 74 percent in the Asia-Pacific region and 79 percent in theThe question isn't necessarily *if* the dollar's influence will wane, but *how much* and *how quickly*. The growing trend within BRICS to engage in trade using local currencies signals a significant challenge to the longstanding dominance of the US dollar in global commerce, highlighting a transformative shift in the world s economic order.This article delves into the complex interplay between BRICS and the US dollar, examining the factors driving this de-dollarization trend, the potential consequences for the United States and the global economy, and the challenges that lie ahead for the BRICS nations as they navigate this ambitious endeavor.We'll also explore what this changing dynamic means for investors and the future of international commerce.

Understanding the BRICS Push for De-dollarization

The drive to reduce dependence on the US dollar, often referred to as de-dollarization, is not a sudden phenomenon. It has been 80 years since the Bretton Woods Conference, when the U.S. dollar became the central pillar of the world economy and of U.S. economic statecraft.It's a multifaceted effort fueled by several key factors:

• Geopolitical Tensions: Growing tensions between the West and Russia, particularly in the wake of international conflicts, have prompted countries to seek financial systems less susceptible to geopolitical influence and sanctions.
• Economic Sovereignty: BRICS nations are increasingly assertive in their desire for economic independence. Should the BRICS nations establish a new reserve currency, it would likely significantly impact the US dollar, potentially leading to a decline in demand, or what's known asThey aim to reduce their vulnerability to US monetary policy and external economic pressures.
• Diversification: Depending heavily on a single currency exposes economies to currency fluctuations and potential financial instability.BRICS seeks to diversify their reserves and trade settlements to mitigate these risks.
• Perceived Unfairness: Some argue that the dollar's dominance gives the US an unfair advantage in global trade and finance.A BRICS currency could level the playing field.

These factors have led to several concrete actions by BRICS nations, including:

• Trading in Local Currencies: Increasing bilateral trade agreements using their own currencies (e.g., the Chinese Yuan and the Russian Ruble) rather than the US dollar.
• Exploring a New BRICS Currency: Discussing the creation of a common currency, potentially backed by a basket of member countries' currencies or commodities, to facilitate trade within the bloc.
• Developing Alternative Payment Systems: Working on payment systems that bypass the SWIFT network, which is largely controlled by Western nations.This includes exploring Central Bank Digital Currencies (CBDCs) and platforms like m-Bridge.
• Shifting Away from US Dollar Debt: Increasing investments in bonds denominated in other currencies, such as the Chinese Renminbi (RMB).

The Potential Impact on the US Dollar

If BRICS succeeds in its de-dollarization efforts, the consequences for the US dollar could be significant:

• Reduced Demand for the Dollar: As countries conduct more trade and financial transactions in other currencies, the demand for US dollars would likely decrease.
• Weakening of the Dollar's Value: Lower demand could lead to a depreciation of the dollar's value relative to other currencies.
• Increased Volatility in US Bond Markets: A decline in foreign demand for US Treasury bonds could lead to higher interest rates and increased volatility in the bond market.
• De-dollarization by Other Nations: A successful BRICS alternative could inspire other countries to reduce their reliance on the dollar, further accelerating the trend.

The greenback's strength is intrinsically linked to its status as the petrodollar (the currency in which oil is primarily traded) and its role as the world's primary reserve currency. BRICS aims to reduce reliance on the US dollar, driven by geopolitical tensions and economic sovereignty. While de-dollarization efforts have gained traction, structural challenges, coordination issueAn alternative would challenge both pillars.

The Threat to Reserve Currency Status

The most significant, albeit long-term, threat is to the dollar's status as the world's reserve currency.This status provides the US with several advantages, including:

• Lower Borrowing Costs: High demand for US Treasury bonds keeps interest rates relatively low, allowing the US government to borrow money at favorable terms.
• Increased Purchasing Power: The dollar's global acceptance allows the US to purchase goods and services from other countries more easily.
• Geopolitical Influence: The dollar's dominance gives the US significant influence over the global financial system.

If the dollar loses its reserve currency status, these advantages would diminish, potentially leading to:

• Higher Interest Rates: The US government would likely face higher borrowing costs, increasing the national debt.
• Decreased Purchasing Power: The cost of imports would likely increase, reducing the purchasing power of American consumers.
• Reduced Geopolitical Influence: The US would lose some of its leverage in international affairs.

Challenges Facing BRICS in De-dollarization

While the BRICS nations have made significant strides in their de-dollarization efforts, they face several considerable challenges:

• Structural Challenges: The US dollar's entrenched position in the global financial system makes it difficult to displace.Many international contracts are denominated in dollars, and financial institutions around the world are heavily invested in dollar-denominated assets.
• Coordination Issues: Achieving consensus among the BRICS nations on a common currency or payment system can be challenging due to differing economic interests and political priorities.
• Economic Inequalities within BRICS: The economic disparities between BRICS members (e.g., China vs. This article explores the impact of the BRICS nations on global trade patterns and what it means for the future of international commerce. The Rise of BRICS in Global Trade A Shift in Economic Power. The BRICS nations collectively represent over 40% of the world s population and nearly a quarter of the global GDP.South Africa) could create imbalances and instability in a common currency system.
• Trust and Stability: For a new currency to gain widespread acceptance, it must be perceived as stable and trustworthy.Building this level of confidence will take time and require sound economic policies.
• Limited Global Presence in Key Areas: While BRICS represents a significant portion of the global economy, its influence in some areas, such as global finance and technology, is still less than that of the US and other developed nations.

The Dominance of the US Dollar

Despite the BRICS push, the US dollar remains the predominant currency for global trade and central bank reserves. A united BRICS currency could boost trade and global influence, and reduce reliance on the US dollar. Critics warn of potential economic inequalities and political strife.A recent study highlights the enduring reliance on the dollar, even as alternative currencies gain traction. At the same time, BRICS has a much smaller global presence in those areas limiting the impact of its regional de-dollarisation for the global role of the US dollar. Some have suggested central bank digital currency (CBDC) projects such as m-Bridge could be another channel through which the BRICS grouping could de-dollarise the global crossOvercoming this entrenched dominance will require a sustained and coordinated effort by the BRICS nations.

Is a BRICS Currency a Realistic Possibility?

The idea of a BRICS currency has been floated for years, and while the concept has merit, significant hurdles remain.The currency's success would depend on several factors:

• Widespread Adoption: The currency needs to be widely accepted for international trade and investment.
• Perceived Stability: It must be seen as a stable and reliable store of value.
• Effective Governance: A strong and independent governing body is needed to manage the currency and ensure its stability.
• Political Will: All BRICS members must be fully committed to the project and willing to overcome any challenges.

Even if a BRICS currency is not fully realized, the efforts to promote trade in local currencies and develop alternative payment systems are already impacting the dollar's dominance.

The Role of Central Bank Digital Currencies (CBDCs)

Central Bank Digital Currencies (CBDCs) could play a significant role in the de-dollarization process. This month, the BRICS nations will meet to discuss, among other matters, a new currency that will rival the US dollar as the global reserve standard (Wu Hong/AFP via Getty Images) During the 2025 BRICS summit, Russian President Vladimir Putin announced that the bloc was working to create an international reserve currency . This will againProjects like m-Bridge, which involves multiple central banks, could facilitate cross-border payments without relying on the US dollar or the SWIFT system. Should the BRICS nations establish a new reserve currency, it would likely significantly impact the US dollar, potentially leading to a decline in demand, or what s known as de-dollarization. In turn, this would have implications for the United States and global economies.CBDCs could also make it easier for countries to trade in their own currencies, further reducing the demand for dollars.

Examples of De-dollarization in Action

Several examples illustrate the ongoing de-dollarization trend:

• Russia and China: These countries have significantly increased their trade in Rubles and Yuan, reducing their reliance on the US dollar.
• Oil Transactions: Some countries are now accepting Yuan for oil payments, bypassing the petrodollar system.
• RMB Bonds: The BRICS alliance has catalyzed a shift away from US dollar debt and toward RMB-denominated bonds.
• Japan's Purchase of Russian Oil: Even amidst international sanctions, Japan continues to buy Russian oil, demonstrating a willingness to circumvent the dollar-dominated financial system.

What Does This Mean for Investors?

The potential weakening of the US dollar and the rise of alternative currencies could have significant implications for investors:

• Diversification: Investors may want to consider diversifying their portfolios to include assets denominated in other currencies, such as the Euro, Yuan, and other emerging market currencies.
• Commodities: Commodities, which are often priced in dollars, could become more attractive as the dollar weakens.
• Emerging Markets: Emerging market economies, particularly those within the BRICS bloc, could benefit from the de-dollarization trend.
• Hedging Strategies: Investors may want to consider using hedging strategies to protect their portfolios from currency fluctuations.

It's crucial for investors to stay informed about the evolving global financial landscape and adjust their strategies accordingly.

The Future of the US Dollar: A Gradual Decline?

While a complete displacement of the US dollar as the world's reserve currency is unlikely in the near future, a gradual decline in its dominance is a more plausible scenario. It is to be used for cross-border trade by the BRICS nations: Brazil, Russia, India, China, and South Africa. Weeks later, in Beijing, Brazil s president, Luiz In cio Lula da Silva, chimed inThe BRICS nations are actively pursuing de-dollarization strategies, and their efforts are gaining momentum. The BRICS bloc, led by Russia, is working to create an alternative payment system to reduce dependence on the US and the dollar-dominated financial infrastructure. The integration of paymentThe rise of alternative currencies, the development of new payment systems, and growing geopolitical tensions are all contributing to this trend.

The key question is not whether the dollar will lose some of its influence, but how much and how quickly. This initiative aims to reduce global dependence on the US dollar and promises to disrupt the global economy if it comes to fruition. This currency could reshuffle the cards of global economic power, but also deeply impact the dollar. Here are three concrete ways the BRICS currency will affect the US dollar.The answer will depend on several factors, including the success of the BRICS nations in coordinating their efforts, the stability of their economies, and the willingness of other countries to embrace alternative currencies.

Conclusion: A New Era of Multipolarity

The impact of BRICS on the US dollar represents a significant shift in the global economic order. The recent BRICS Summit, held in Kazan, Russia, from October 22 to 24, 2025, focused on promoting currency cooperation and exploring alternatives to the dollar. Through initiatives like enablingWhile the dollar's reign as the undisputed king of currencies is not over, its dominance is being challenged.The rise of BRICS, the push for de-dollarization, and the emergence of alternative financial systems are all contributing to a more multipolar world, where the US dollar no longer holds absolute sway.This evolving landscape presents both challenges and opportunities for the United States and the global economy. The US dollar s displacement of the previous hegemonic currency, namely, the British pound sterling, attests to this notion. The importance of examining BRICS challenge to the US dollar s dominance lies in the group s collective economic power. BRICS accounts for 24 percent of world GDP and over 16 percent of world trade (BRICS India, 2025Staying informed, adapting to change, and embracing diversification will be crucial for navigating this new era.

Key Takeaways:

• BRICS nations are actively working to reduce their reliance on the US dollar.
• De-dollarization efforts could weaken the dollar's value and reduce its global influence.
• A BRICS currency is a long-term goal, but faces significant challenges.
• Investors should consider diversifying their portfolios to account for currency fluctuations.
• The global financial landscape is shifting towards a more multipolar world.

As the world moves towards a potential multi-currency system, ongoing monitoring of BRICS policies, global trade dynamics, and technological advancements in financial systems will be crucial for understanding the evolving impact on the US dollar.