Russia and China are brewing up a challenge to dollar dominance
Creating a New Reserve Currency
- Russia and China are developing a new reserve currency with other BRICS countries, President Vladimir Putin said.
- The basket currency would rival a US-dominated IMF alternative and let Russia widen its influence, an analyst said.
- The dollar’s dominance is already eroding as central banks diversify into the Chinese yuan and smaller currencies.
Russia is ready to develop a new global reserve currency alongside China and other BRICS nations, in a potential challenge to the dominance of the US dollar.
President Vladimir Putin signaled the new reserve currency would be based on a basket of currencies from the group’s members: Brazil, Russia, India, China, and South Africa.
“The matter of creating the international reserve currency based on the basket of currencies of our countries is under review,” Putin told the BRICS Business Forum on Wednesday, according to a TASS report. “We are ready to openly work with all fair partners.”
The dollar has long been seen as the world’s reserve currency, but its dominance in share of international currency reserves is waning. Central banks are looking to diversify their holdings into currencies like the yuan, as well as into non-traditional areas like the the Swedish krona and the South Korean won, according to the International Monetary Fund.
“This is a move to address the perceived US-hegemony of the IMF,” ING’s global head of markets Chris Turner said in a note. “It will allow BRICS to build their own sphere of influence and unit of currency within that sphere.”
Header featured image (edited) credit: BRICS group/Getty Images/M. Hutchings
Emphasis added by (TLB) editors
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