Russia, along with its BRICS partners, has stirred up the global economic order. Their plan? To challenge the US dollar’s dominance. The announcement came last Friday through the Russian Embassy in Kenya. They disclosed an ambitious plan to introduce a new trade currency, backed by gold. This Russia currency news received affirmation from RT, a Russian state-run TV network.
This action bolsters the “de-dollarization” trend. It’s a movement that gained traction after Western countries imposed sanctions on Russia for its Ukrainian invasion.
BRICS Currency: A Long-Term Objective
However, the BRICS bank tempers immediate expectations. A common currency is a “medium to long-term ambition,” it states. No immediate plans exist to create such a currency, they affirm.
In an interview last week, Leslie Maasdorp, the New Development Bank’s VP and CFO, backed this statement.
“No suggestion to create a BRICS currency exists right now… to challenge the dollar’s global dominance.”
Central Banks Diversifying with Gold
A significant shift in central banks’ strategies has emerged since mid-2022. Diversification of their reserves is on the rise. This diversification prominently features the purchase of gold. China and India, BRICS members, were the most noteworthy buyers last year.
Invesco published a survey on Monday supporting this trend. Countries increasingly repatriate gold reserves. They use this as a shield against potential sanctions, like those West imposed on Russia.
Moving Away from the Dollar Amid Geopolitical Tensions
The previous year’s financial upheaval caused significant losses for sovereign money managers. Invesco reports a “fundamental” reevaluation of their strategies. They believe higher inflation and geopolitical tensions are here for the long haul.
These concerns, plus emerging market opportunities, are pushing central banks away from the dollar. Out of 142 surveyed institutions, nearly 80% identified geopolitical tensions as the main risk over the next decade. A slightly higher percentage, 83%, expressed worries about inflation in the next 12 months.
The potential creation of the gold-backed Russia currency could change the economic landscape. Even though the BRICS currency is a long-term plan, these developments hint at a shift in global financial dynamics. It suggests a drive for a more diverse, robust financial system.