Could Rising BRICS Alternatives Undermine the U.S. Dollar’s Reserve Status?

The BRICS bloc — Brazil, Russia, India, China, and South Africa (with Saudi Arabia, UAE, and others slated to join) — has signalled ambitions to create alternative reserve assets and de-dollarise trade. For forex traders and macro investors, the key question is: How much real threat does this pose to the dollar’s hegemony?

1. Why the Dollar Still Dominates

Pillar of USD Strength	Current Share*	Why It Matters
IMF-reported FX reserves	58 %	Central banks hold USD for safety & liquidity
Global trade invoicing	~80 % of trade finance	Companies price goods in dollars (esp. energy)
SWIFT messaging share	~45 %	Cross-border payments rely on USD rails
US Treasury market size	$26 T tradable	Deepest, most liquid risk-free asset

*IMF COFER Q4 2024 data; SWIFT FIN traffic Jan 2025.

2. BRICS Initiatives in Play

Initiative	Status (2025)	Potential Impact
Cross-border digital payment system (CIPS expansion, India–UAE RuPay link, Brazil PIX corridors)	Live in bilateral pilots	Could slowly chip at SWIFT dominance
Local-currency energy deals (Riyadh–Beijing oil contracts in CNY, Russia–India crude in rupees)	Growing but not yet majority	Reduces marginal USD demand for commodities
BRICS commodity-backed settlement unit (often called “BRICS coin”)	Concept stage, feasibility studies	Long-term wildcard; credibility hinges on governance & convertibility
Gold accumulation & bilateral swaps	Russia, China raising gold reserves	Adds diversification but still priced in USD

3. Headwinds Facing BRICS Alternatives

Liquidity & Trust: No BRICS currency matches the depth of U.S. Treasuries.
Capital Controls: China and India restrict outflows, limiting reserve appeal.
Legal Frameworks: Dollar assets benefit from strong U.S. rule of law; BRICS governance is heterogeneous.
Network Effects: Invoicing inertia keeps firms using USD because counterparties expect it.

4. Metrics for Traders to Watch

Metric	Data Source	Bearish-USD Signal
USD share of IMF COFER reserves	IMF quarterly	Sustained drop below 55 %
Petrodollar share of global oil trade	IEA / customs data	Major Gulf producers price >25 % of exports in CNY, INR, etc.
Volume on CIPS vs. SWIFT	CIPS Co., SWIFT	CIPS share >15 % of cross-border CNY payments
BRICS bond issuance in local currencies held by foreigners	BIS statistics	Rapid growth toward ~$1 T marketable float

5. Trading Implications

Slow-Burn Narrative: Any erosion of USD dominance is a multi-decade process—expect episodic USD dips, not a sudden collapse.
Diversification Plays: Increased demand for CNY, INR, and potentially a BRICS unit could lift their long-term valuations.
Safe-Haven Premium: During global stress, the dollar’s liquidity edge still triggers flight-to-quality rallies.
Commodity-Currency Link: More oil invoicing in CNY could tighten the correlation between yuan strength and crude prices.

import pandas as pd
import pandas_datareader.data as web
import matplotlib.pyplot as plt
from datetime import datetime

try:
    start = datetime(2000, 1, 1)
    df = web.DataReader('FDHBFRBNCU', 'fred', start)
    df.plot(title='USD Share of Allocated Global FX Reserves')
    plt.ylabel('%')
    plt.grid(True)
    plt.tight_layout()
    plt.show()
except Exception as e:
    print("Failed to fetch data:", e)

Use this chart to spot structural shifts; a persistent down-trend below historic 55–60 % band would confirm BRICS traction.

Key Takeaway

BRICS alternatives pose a gradual headwind to dollar supremacy, not an imminent avalanche. Traders should treat de-dollarisation as a strategic backdrop—monitor reserve data, commodity invoicing trends, and payment-rail adoption to gauge when (or if) the shift gains real momentum.