16h00 ▪
5
min reading ▪ by
Luc Jose A.
For several years, the BRICS have sought to reduce their dependence on the US dollar by developing a monetary alternative. However, at the start of 2025, the reality of the foreign exchange market escapes them. The dollar is gaining ground more than ever, reaching new heights while the bloc’s currencies are collapsing. The Indian rupee falls to a historic low of 85.93, the Chinese yuan weakens and other local currencies struggle to resist. Despite the efforts of the BRICS to counter the hegemony of the greenback, the current dynamic exposes the limits of their dedollarization strategy and raises the question of the viability of a credible alternative.
The dollar crushes the BRICS currencies
The BRICS dedollarization project comes up against an implacable reality: the dollar remains the safe haven of world markets. At the start of the year, the DXY index, which measures the strength of the greenback against a basket of currencies, experienced nine consecutive days of increases, reaching 109.30, a level close to its historic record of 109. .53. This rise in power complicates the ambitions of the bloc, which is struggling to impose a credible alternative.
The surge in the dollar has immediate repercussions on BRICS currencies. Thus, the Indian rupee collapsed to 85.93 against the dollar, its lowest historical level, and even threatens to cross the 86 mark. The Chinese yuan and the Japanese yen are following the same trajectory, unable to resist the pressure of the greenback. Despite the efforts of the BRICS to limit their exposure to the dollar, the markets continue to favor the American currency, which thus weakens emerging currencies.
Several factors explain this dominance of the dollar. The US Department of Labor has released figures that demonstrate a robust job market in the United States. Weekly claims for unemployment benefits fell to 201,000 from 211,000 previously, boosting investor confidence. At the same time, Christopher Waller, Governor of the Federal Reserve, indicated that inflation should continue to fall in 2025, a signal seen as favorable for the American economy. This combination of indicators stimulates demand for the dollar, and relegates the BRICS currencies to struggle in the face of a currency which continues to gain in attractiveness.
A dedollarization project at an impasse?
Faced with the uninterrupted rise of the dollar, the BRICS dedollarization project seems to be stalling. Despite regular announcements on the creation of a common currency, no major progress has materialized. India, a key member of the bloc, is strengthening its dollar reserves, suggesting a loss of confidence in the feasibility of a viable alternative. This strategic choice underlines the internal contradictions within the BRICS, where the economic interests of the members diverge in the face of the domination of the greenback.
If the bloc aims to reduce its exposure to the dollar, it is still struggling to build a credible alternative. The hegemony of the dollar rests on two pillars: its stability and its liquidity, assets that the BRICS currencies fail to match. Although certain countries have signed bilateral agreements which aim to promote trade in local currencies, these initiatives remain marginal and in no way alter the influence of the dollar on world trade.
The challenge of dedollarization goes beyond monetary agreements. Investors and financial institutions continue to favor the dollar because of its long-term reliability. As long as this dynamic continues, the BRICS will struggle to impose an alternative capable of competing with a currency which remains the backbone of the global financial system. To reverse the trend, the bloc will have to offer tangible solutions capable of convincing the markets that an alternative to the dollar is not only possible, but also preferable.
The BRICS bet to free themselves from the dollar is confronted with an implacable reality: the greenback remains the pillar of international trade and continues to attract investors and financial institutions. Despite its stated ambitions, the alliance is struggling to offer a viable alternative capable of reversing the trend. Without a credible, widely adopted currency supported by a robust financial infrastructure, the dollar will retain its central role in the global economy. As long as this dependence persists, the BRICS risk remaining on the margins of the global financial system, rather than redefining its rules.
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Luc Jose A.
A graduate of Sciences Po Toulouse and holder of a blockchain consultant certification issued by Alyra, I joined the Cointribune adventure in 2019. Convinced of the potential of blockchain to transform many sectors of the economy, I took the commitment to raise awareness and inform the general public about this constantly evolving ecosystem. My goal is to enable everyone to better understand blockchain and seize the opportunities it offers. I strive every day to provide an objective analysis of current events, to decipher market trends, to relay the latest technological innovations and to put into perspective the economic and societal issues of this ongoing revolution.
