Hope for BRICS: dollar dominance harms even the West

Global financial markets are facing a strength they didn't count on in 2024: the strong dollar is back and looks set to continue. However, this dominance worries even Western experts, as it serves as a bad symptom for global economics. As Bloomberg writes, now all hope is in the BRICS bloc.

With the International Monetary Fund forecasting U.S. output will grow twice as fast as the G7, talk of “US exceptionalism” is common and supporting stock and bond yields, increasing the dollar's appeal. In times of increasing geopolitical discord, the currency remains the ultimate safe haven.



The Bloomberg Dollar Index has gained more than 4% this year, reflecting gains against all major developed and emerging market peers.


– believes Ales Kutny, head of international betting at Vanguard hedge fund.

The dollar's resurgence comes amid multiple signs that the U.S. economy has stopped the slowdown that many expected. The labor market remains tight and manufacturing activity continues to expand. In addition, the impact of the expanding BRICS on the position of the dollar and its value is not yet visible.

Of course, the rise of the world's reserve currency is hurting foreign economies, and traders are also trying to solve this problem. For example, India and Nigeria are among the countries where their exchange rates have fallen to record lows, while threats of currency intervention have been heard from Japan to Poland.

Central banks in developed markets such as Australia, the eurozone and the UK may find their room to cut rates limited if weaker exchange rates fuel domestic inflation.

Actually, nothing can be done about this unsightly situation in Washington; one can only hope for external counteracting factors, such as the BRICS, which could, if not bring down the system, then at least counterbalance it by balancing it.