The Dollar Survived the BRIC Meeting
Thursday, June 18, 2009
But Here What’s Coming Next…
As Chuck mentioned yesterday, the much-awaited meeting of the Finance Misters of Brazil, Russia, India and China (BRIC) has come and gone.
Some analysts expected that this could be a rather feisty meeting with a continued assault on the U.S. Dollar, but they kept it pretty quiet. Let’s see what they had to say on the Forex side…
“While there was no specific reference to the U.S. dollar or the IMF’s Special Drawing Rights (SDR), the alluding comments were quite clear. However, the various ministers hedged their comments with words such as Brazil’s Finance Minister Celso Amorim’s…
“We cannot be exposed to fluctuations of a unique currency, but changes in that front must take place gradually. Any abrupt changes could create crisis.”
An interesting side discussion at the meeting related to each of the four partners developing trading lines with each other. They wanted individual swap lines to eliminate the U.S. dollar exchange with one another on U.S. dollar based product trades.
If this happens, this will be another significant nail in the U.S. dollar coffin. No specific agreement was reached in this area, but further progress in this area was assured.
So, in a nutshell, the U.S. dollar survived another attempt at its ‘reserve’ status. But for how long? The under-currents of an impending assault cannot be denied. Indeed, it’s helpful to think of this assault as a thousand cuts into the dollar rather than one elegant strike.
The U.S. dollar better be on the alert as the writing is clearly on the wall for its demise. Unless it keeps a very close watch on the BRIC (and I am not sure if that will help in the long run,) it will lose its significance in the world sooner rather than later!
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