Bank of New York Mellon said in a note that it is unlikely that the dollar will lose its status as the global reserve currency any time soon, even as the expansion of the BRICS group of developing countries signals a new challenge to the dollar’s dominance of the global economy.
The leaders of the group, which includes Brazil, Russia, India, China and South Africa, invited Iran, Argentina, Saudi Arabia, the UAE, Ethiopia and Egypt to join it at a summit held last week in Johannesburg.
The bank, which is considered the oldest bank in the United States, indicated in a report published on Friday that one of the goals of BRICS is to find an alternative to the dollar.
He said that the accession of Iran, the UAE, Egypt and Saudi Arabia will make the group in its new form influential in the energy exports sector, especially oil, which indicates the emergence of a basket of primary commodities backed by gold and oil through the new group.
The countries of the new group control 75% of the world’s manganese, 50% of graphite, 28% of nickel, and 10% of copper.
At the same time, the addition of Saudi Arabia, the UAE, and Iran to the group adds to it 3 of the world’s largest oil exporters, representing 42% of global oil supplies.
However, the bank says this will not be enough to challenge the dollar’s dominance.
“We rule out that the dollar will lose its place in global reserves any time soon,” wrote Bob Savage, head of market strategies and analysis at the bank. “New monetary unions should look to technology or green baskets rather than baskets based on gold or carbon.”
“Including the UAE and Saudi Arabia raises per capita GDP and economic strength, but it likely conflicts with long-term issues regarding the energy transition from carbon to sustainable sources,” Savage said.