The BRICS nations, Brazil, Russia, India, China, and South Africa are taking shots at the dollar again. At the end of recently concluding meeting in China, their development banks agreed to open credit lines denominated in their own currencies rather than the world's reserve currency, the US dollar.
The plan was announced in the backdrop of a weak dollar something the BRIC nations fear will erode the value of their foreign exchange reserves held mostly in the US currency. This isn't the first time these countries have called for an alternative monetary regime.
And while this is a hint that the US will have to work hard to defend the credibility of its currency, experts say it is unlikely to end the dollar's dominance any time soon.
The BRICS group holds 40 per cent of the world's currency reserves, the majority of which are still in US dollars and not all BRIC currencies are freely tradable.
"This is unlikely to affect the market. The US dollar will continue to remain the reserve currency but this is good from a co operation point of view. Things will change but it will take time. We will need the rupee to be fully convertible," said Jamal Mecklai, CEO of Mecklai Financial Services.
As for the dollar, it will continue to weaken in the medium term say experts.
"Central banks around on the world are on a tightening spree by raising rates but the US fed is easing its monetary policy stance," said Vikash Bairoliya, an analyst at Nirmal Bang.
What will now matter is how determined the BRICS countries are to put this plan in place since in the past such summits have been more talk and less action.
Read more at: http://profit.ndtv.com/news/show/brics-to-replace-dollar-credits-with-local-currencies-149845?pfrom=home-Business&cp
The plan was announced in the backdrop of a weak dollar something the BRIC nations fear will erode the value of their foreign exchange reserves held mostly in the US currency. This isn't the first time these countries have called for an alternative monetary regime.
And while this is a hint that the US will have to work hard to defend the credibility of its currency, experts say it is unlikely to end the dollar's dominance any time soon.
The BRICS group holds 40 per cent of the world's currency reserves, the majority of which are still in US dollars and not all BRIC currencies are freely tradable.
"This is unlikely to affect the market. The US dollar will continue to remain the reserve currency but this is good from a co operation point of view. Things will change but it will take time. We will need the rupee to be fully convertible," said Jamal Mecklai, CEO of Mecklai Financial Services.
As for the dollar, it will continue to weaken in the medium term say experts.
"Central banks around on the world are on a tightening spree by raising rates but the US fed is easing its monetary policy stance," said Vikash Bairoliya, an analyst at Nirmal Bang.
What will now matter is how determined the BRICS countries are to put this plan in place since in the past such summits have been more talk and less action.
Read more at: http://profit.ndtv.com/news/show/brics-to-replace-dollar-credits-with-local-currencies-149845?pfrom=home-Business&cp
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