BRICs Shift From Dollar

With the continuous concern about the value of U.S. currency, Brazil, Russia, India and China are considering buying each other’s bonds and swapping currencies to lessen dependence on the U.S. dollar .

The BRIC countries have combined reserves of $2.8 trillion and are among the biggest holders of U.S. Treasuries.

This is not something for the immediate future, but rather a direction of movement, no more than a few percent of reserves could be reinvested into BRIC bonds. What we’re seeing is a continuation of discussions to find an alternative to the dollar, yet nobody is going fundamentally to alter anything yet.

This move shows a very strong desire of developing countries to play a bigger role in world finance, especially given the growing insecurity related to the current crisis. Russia challenged the dollar domination earlier saying “There can be no successful global currency system if the financial instruments that are used are denominated in only one currency”.

In the long term, it is beneficial for all that the world needs a few strong currencies, however, it cannot happen quickly.