ING - BRICS expansion and the Dollar, August 2023

This report focuses on the potential impact of an expanded BRICS bloc on the de-dollarisation trend. The BRICS grouping of major emerging economies - Brazil, Russia, India, China, and South Africa - is holding its fifteenth summit, where an expansion of the bloc, greater use of local currencies, and the possibility of a BRICS currency will be discussed. This new currency could potentially challenge the dominance of the US dollar, which has been the world's reserve currency for decades. In our report, we examine the evolution of the US dollar's role in the global economy and markets, including its share of central banks' FX reserves and the structure of the FX market. We also explore the factors that could influence the speed of de-dollarisation in the BRICS bloc, such as trade and capital flows, geopolitical tensions, and technological advancements. Finally, we consider the potential implications of a BRICS currency for the global financial system. While it could provide greater diversification and reduce dependence on the US dollar, it could also create new risks and challenges, such as currency volatility, liquidity issues, and regulatory hurdles. Our report aims to provide insights and analysis to help readers navigate this complex and rapidly evolving landscape.