In a recent report, BCA Research assessed the US dollar’s future amid a rising BRICS de-dollarization push. The study says BRICS members increasingly settle cross-border trade in local currencies, creating pressure on dollar stability worldwide.
According to BCA Research‘s Dollar Dominance Indicator, the measure evaluates five roles of the greenback. Those roles are FX reserves, FX trading volumes, foreign-currency debt issuance, international banking claims, and global payments and trade finance.
The indicator finds the US dollar still passes all five tests and remains dominant. “dollar’s dominance remains entrenched across global financial markets, payments and trade, underpinned by strong network effects that make diversification away from the US-centric system slow and difficult,”
The report notes that changing transaction currencies needs broad coordination among many users. “While countries adjust reserve allocations unilaterally, shifting transaction currencies in trade, banking, and capital markets requires coordination among many users, which limits the pace of change.” The study therefore forecasts the US dollar’s supremacy will persist for the foreseeable future.
