Farewell to the Dollar?
“In developing mutual trade and investments it’s really important to stay away from currency risks and convert payments to national currencies. This helps avoid currency market volatility and mono-currency-dependency,” specified the head of the giant state lender – an institution that was also among the initiators of an idea to join development banks across BRICS (Brazil, Russia, India, China and South Africa).
This is a lengthy process, as “we [BRICS member states] should synchronize our currency legislation, accounting standards etc,” Dmitriev added. Anyway, “all we have to do now is to start,” he said. “We’ve been talking for a long time about the same [issue] with China. And as you can see it’s already years since the Chinese yuan traded on the Russian bourse, near-border trade is operated in national currencies.”
Among other initiatives to cement the bricks in the BRICS ‘club’ were decisions in March to establish a joint development bank and to launch a united stock index. The BRICS also agreed to extend credits in local currencies as a step to facilitate economic growth and to replace the dollar as the reserve currency in mutual trade.
As trade turnover between BRICS members is rapidly growing at about 28% a year and stands at around $230 billion at the moment, moving away from the greenback to make cooperation between BRICS members safer is vital, experts say.
More recently, China and Japan said they were set to start trading their local currencies directly on both markets since June 1. This is to raise the currencies’ profile abroad, as well as contribute to China’s effort to cut its currency links to the US dollar.
Also, China, Japan and South Korea plan to sign a free trade agreement by the end of the year to ease off dollar dependency in foreign trade.