Greenback Status Unchallenged by BRICS – ING
(23 August 2023 – The Netherlands) Despite an expanded Brazil, Russia, India, China and South Africa (BRICS) alliance and new reserve currency potential to challenge US Dollar hegemony, ING does not foresee the greenback facing any immediate danger of losing its primary global currency status.
While there has been a decline in the greenback’s share of central banks’ FX reserves, dollar usage has held up strongly in commerce, private assets, debt issuance and generally on the global FX market. The rising usage of alternative currencies does not seem to be threatening the dollar but rather increasing the competition among the regional currencies amid fragmentation of the trade and capital flows.
In ING’s report BRICS expansion and the dollar: Would a larger bloc mean faster de-dollarisation?, the bank suggests that among the potential dollar challengers, the euro may seem like a runner-up, but its dominance is seen only in Europe. Among the BRICS, China’s amplification of renminbi swap lines seems to have helped promote the use of its currency in trade and international reserves, and Russia’s geopolitical aversion to the dollar gave RMB a boost, but China’s capital controls and low issuance of panda bonds remain a major impediment.
“No currency has made any inroad to the dollar’s pre-eminent status as the issuance currency of choice. Having been a major factor in removing sterling’s crown last century, challenging the dollar’s status in the international debt market has to be a central strategy for the young pretenders. Overall, we do not see any conclusive evidence that the dollar is on the path of structural decline at this point. However, it is still facing challenges, stemming from both economics and geopolitics” the report authors ING Global Head of Markets, Chris Turner, ING Chief Economist CIS, Dmitry Dolgin and ING Emerging Markets Sovereign Debt, James Wilson state.
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