By Andrea Shalal
WASHINGTON (Reuters) – The U.S. dollar remains the world’s top reserve currency, and neither the euro nor the so-called BRICS have managed to reduce global dependence on the dollar, a new study from the Atlantic’s GeoEconomics Center shows Council.
According to the group’s ‘Dollar Dominance Monitor’, the dollar continued to dominate foreign reserves, trade invoicing and foreign exchange transactions worldwide and its role as the main global reserve currency was secure in the short and medium term.
Dollar dominance – the US dollar’s outsized role in the global economy – has recently strengthened given the robust US economy, tighter monetary policy and heightened geopolitical risks, even as economic fragmentation has fueled the BRICS’ drive to to move to other international and international economies strengthened. reserve currencies.
The Atlantic Council report said that Western sanctions on Russia, imposed by the Group of Seven advanced economies following Moscow’s invasion of Ukraine, had accelerated the BRICS’ efforts to develop a monetary union, but that the group had failed to make progress in its efforts to de-dollarize the dollar. .
BRICS is an intergovernmental organization consisting of Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia and the United Arab Emirates.
The council said China’s Cross-Border Interbank Payment System (CIPS) added 62 direct participants in the 12 months to May 2024, an increase of 78%, bringing the total to 142 direct participants and 1,394 indirect participants.
Negotiations on an intra-BRICS payment system were still in their early stages, but bilateral and multilateral agreements within the group could eventually form the basis for a currency exchange platform. However, these agreements were not easily scalable because they were negotiated separately, the report said.
It noted that China has been actively supporting liquidity through swap lines with its trading partners, but the renminbi’s share of global foreign exchange reserves has fallen to 2.3% from a peak of 2.8% in 2022.
“This may be due to reserve managers’ concerns about the Chinese economy, Beijing’s stance on the Russia-Ukraine war, and a possible Chinese invasion of Taiwan, which contributes to the perception of the renminbi as a geopolitically risky reserve currency” , the report said.
The euro, once considered a rival to the dollar’s international role, also weakened as an alternative currency, with those looking to reduce their risk exposure turning to gold instead, the report said.
It said Russian sanctions had made it clear to reserve managers that the euro was exposed to similar geopolitical risks as the dollar. Concerns about macroeconomic stability, fiscal consolidation and the lack of a European capital markets union are also damaging the euro’s international role, the report said.
