a new currency that could gain momentum?

a new currency that could gain momentum?
a new currency that could gain momentum?

In the world, there is one dominant currency: the dollar. Is the latter’s hegemony threatened today? Would it face significant challenges resulting from the emergence ofa new currency that could gain momentum ? Would he be threatened? Answers in this article.

The dollar: its development and its power

The dollar played an important role in trade, foreign exchange transactions and central bank reserves after the First World War. The dollar is also an international currency. It makes it possible to determine the price of each good. Since the United States pays for its imports using its own money, the dollar therefore escapes the balance of payments crisis.

But how can we explain its hegemony? Compared to certain currencies, the dollar constitutes a larger proportion of foreign exchange reserves in the Central Bank. By the end of 2023, this share had risen to 59%.

Creation of a new reserve currency: a threat to the dollar?

Could this dollarization end soon? Know thata part of the BRICS countries or Brazil, Russia, India, China and South Africa, wants to overcome American domination by creating a new reserve currency. A proposal that was already debated during the BRICS summit which took place in Durban. As a reminder, to carry out transactions from one country to another, you must necessarily use the dollar. The crisis in Ukraine has intensified this desire for dedollarization.

Besides BRICS, other European countries also have this dream of wanting to get rid of this underlying American dependence. But, unlike the former, the latter approve of this hegemony. All this explains the dollar fatigue of many groups. The United States should therefore react accordingly to slow down the momentum of the BRICS.


What is the BRICS project really about?

With the dollar, Americans benefit from an exorbitant privilege. If the BRICS project comes to fruition, it will certainly create enormous conflicts. But the will of the latter remains purely political. On the economic plan, their weight in global GDP went up to 25.5% in 2018. Their strength ? They have in their possession the majority of raw material reserves in the entire world. If they succeed in implementing their project, it would weaken the position of the dollar.

To compete with the dollar, the BRICS currency should fulfill the academic functions of money. For the moment, the project is to make this currency a store of value. It remains to be determined whether it will be able to attract enough confidence to replace the dollar.



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