The U.S. dollar continues to be the world’s primary reserve currency, with neither the euro nor the BRICS countries significantly reducing global reliance on the dollar, according to a new study by the Atlantic Council’s GeoEconomics Center.
This was revealed in a report by Reuters.
The “Dollar Dominance Monitor” from the Atlantic Council highlights that the dollar still leads in foreign reserve holdings, trade invoicing, and currency transactions globally. The report indicates that the dollar’s position as the primary global reserve currency is secure for the near and medium term.
The dominance of the U.S. dollar in the world economy has been reinforced by a strong U.S. economy, tighter monetary policy, and increased geopolitical risks. Although economic fragmentation has led BRICS countries to push for the use of other international and reserve currencies, these efforts have not yet succeeded.
The Atlantic Council report notes that Western sanctions on Russia, imposed by the Group of Seven advanced economies following Moscow’s invasion of Ukraine, have accelerated BRICS countries’ efforts to develop a currency union. However, these countries have not made significant progress in de-dollarisation.
China’s Cross-Border Interbank Payment System (CIPS) saw a 78% increase in direct participants in the 12 months leading up to May 2024, bringing the total to 142 direct participants and 1,394 indirect participants.
Negotiations for an intra-BRICS payment system are still in the early stages. Bilateral and multilateral agreements within the group may eventually form the basis for a currency exchange platform, but these agreements are challenging to scale as they are individually negotiated, the report states.
The report also mentions that China has been actively supporting renminbi liquidity through swap lines with its trade partners. However, the share of the renminbi in global foreign currency reserves has declined to 2.3% from its peak of 2.8% in 2022.
