By Andrea Shalal
WASHINGTON (Reuters) – The U.S. greenback stays the world’s main reserve forex, and neither the euro nor the so-called BRICS nations have been in a position to scale back international reliance on the greenback, a brand new research by the Atlantic Council’s GeoEconomics Middle reveals.
The group’s “Greenback Dominance Monitor” mentioned the greenback continued to dominate overseas reserve holdings, commerce invoicing, and forex transactions globally and its position as the first international reserve forex was safe within the close to and medium time period.
Greenback dominance — the outsized position of the U.S. greenback on this planet financial system — has been strengthened not too long ago given the sturdy U.S. financial system, tighter financial coverage and heightened geopolitical dangers, at the same time as financial fragmentation has strengthened a push by BRICS nations to shift into different worldwide and reserve currencies.
The Atlantic Council report mentioned Western sanctions on Russia imposed by the Group of Seven superior economies after Moscow’s invasion of Ukraine had accelerated efforts by the BRICS nations to develop a forex union, however the group had been unable to make progress on its de-dollarization efforts.
BRICS is an intergovernmental group made up of Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates.
The council mentioned China’s Cross-Border Interbank Fee System (CIPS) added 62 direct members within the 12 months to Might 2024, a rise of 78%, bringing the full to 142 direct members and 1,394 oblique members.
Negotiations round an intra-BRICS fee system had been nonetheless within the nascent phases, however bilateral and multilateral agreements inside the group may kind the premise for a forex alternate platform over time. Nonetheless, these agreements weren’t simply scalable, since they had been negotiated individually, the report mentioned.
It famous that China has actively supported liquidity by swap strains with its commerce companions, however the share of renminbi in international overseas forex reserves dropped to 2.3% from the height of two.8% in 2022.
“That is probably due to reserve managers’ concern about China’s financial system, Beijing’s place on the Russia-Ukraine warfare, and a possible Chinese language invasion of Taiwan contributing to the notion of the renminbi as a geopolitically dangerous reserve forex,” the report mentioned.
The euro, as soon as thought-about a competitor to the greenback’s worldwide position, was additionally weakening in its place forex, with these trying to scale back their danger publicity turning to gold as a substitute, the report mentioned.
It mentioned Russian sanctions had made it clear to order managers that the euro was uncovered to related geopolitical dangers because the greenback. Issues round macroeconomic stability, fiscal consolidation, and the dearth of a European capital markets union additionally harm the euro’s worldwide position, it mentioned.
