What forex traders need to know about BRICS’ de-dollarisation efforts

There’s talk going around about BRICS creating a new gold-backed international currency, sparking fears that it could spell trouble for America and the dollar as the world’s main currency. Developing nations are growing vary of America’s financial dominance, especially with the recent sanctions from Russia. There was a time when currencies were backed by gold. The more gold a nation has, the more money could be printed. When the Bretton Woods agreement came into force, the US became a major economic power after World War II. The international monetary system that was set up by 44 allied nations viewed the USD as a safe currency to keep as reserves.

Under this system, gold was fixed at $35 per ounce. Countries sent lots of gold to the US, where the Treasury kept it safe. Central banks could trade their extra USD for gold whenever they needed to. However, things took a turn when the United States faced a trade deficit, resulting in a massive outflow of USD. When President Nixon announced the suspension of the dollar’s convertibility into gold, the world was shocked. As today’s currencies aren’t backed by tangible assets, countries could print more money as needed—sometimes excessively. This is one reason why inflation is rampant in certain areas.

Read more to discover how a BRICS currency could replace the dollar.