BRICS Nations Challenge US Dollar Dominance with New Currency Swap Initiative

EDITOR'S NOTES

In a significant development that could alter the landscape of global finance, China, representing the BRICS bloc, announced the launch of a comprehensive currency swap program aimed at bolstering trade with developing nations using local currencies. This initiative marks a strategic departure from the traditional reliance on the US dollar for international transactions, underscoring the BRICS alliance’s intent to promote the use of member nations’ currencies in global trade and commerce. Valued at an impressive $553.49 billion, the scheme allows central banks of participating countries to engage in direct currency swaps, facilitating trade and investment by minimizing exchange rate costs and banking fees. This move is seen as a direct challenge to the dominance of the US dollar and could have wide-ranging implications for the United States’ financial hegemony on the world stage.

Eric Blair Apr 9, 24

BRICS member China made a huge financial announcement last week indicating that they are launching a new currency swap program with developing countries. The currency swap allows the Central Banks of developing countries to sign an agreement with China that would facilitate trade in local currencies. Central Banks can swap their local currencies for trade with China and save millions in exchange rates.

The US dollar will play no role in the currency swap agreement making local currencies the centerpiece of all transactions. The move comes in line with the BRICS alliance looking to push local currencies first for trade and commerce instead of the US dollar. Read here to know how many sectors in the US will be affected if BRICS ditches the dollar for trade.

BRICS: Currency Swap With China Is Worth $553.49 Billion

china xi jinping president brics countries flags — Source: Associated Press

China is looking to sign currency swap agreements with 29 developing countries including that of BRICS nations. The currency swap agreement will be worth $553.49 billion in local currency exchange without the interference of the US dollar. The development makes transactions of local currencies in the ‘always trading’ mode on the foreign exchange market.

The bilateral currency swap facilitates trade and investment options by adding a safety net for all local currencies. Each Central Bank can swap its local currencies for another and settle trade with lower exchange rates and fees. The move is a win-win situation for BRICS, China, and other developing countries as they can save costs for cross-border transactions while making use of their local currency.

Pan Gongsheng, Governor of the People’s Bank of China confirmed that the currency swap agreement will take place in 2024. “Bilateral currency swaps can provide emergency liquidity support in times of turmoil in international financial markets and banking crises in some countries,” he said to Reuters.

This article originally appeared on Watcher.Guru