The collapse of the Russian ruble and the Chinese yuan shows why a potential BRICS currency is not a threat to the U.S. dollar’s status as the world’s reserve currency, Breitbart Economics Editor John Carney told Fox Business host Larry Kudlow Friday.
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Developing countries are seeking to reduce their dependence on the American dollar as the global reserve currency, some of which are instead turning to the Chinese yuan as the communist nation fosters a growing role for itself in the international economy.
Read More: Daily Wire
The euro dropped below parity against the dollar on Wednesday for the first time in almost two decades, as a hawkish U.S. Federal Reserve and growing concern about rising recession risks in the euro area continued to batter the currency.
The euro’s slide is a headache for the ECB. Allowing the currency to fall only fuels the record-high inflation the ECB is battling to contain. But trying to shore it up with higher interest rates could exacerbate recession risks.
Read More: US News
Ahead of the BRICS summit in South Africa, China and Brazil have struck a deal which will see the two emerging economies trade in each others currencies, and not the dollar.
The deal amounts to around $30 billion per year, and is the most significant step the nations have taken to shift the dynamics of global trade away from the dollar.
The BRICS nations (Brazil, Russia, China, India and South Africa) have long sought to change the balance of global trade away form the dollar, which is presently the global reserve currency.
The BRICS summit will also discuss the formation of a new International Development Bank, which they hope will serve as an alternative to the World Bank. The BRICS leaders argue that the establishment of a new development bank would make the global banking system more democratic.