The main goal of the BRICS group of emerging economies is to replace the US dollar with local currencies and promote developing countries to become the driving force of the global economy.
However, Swiss leading investment bank UBS has forecast an optimistic future for the USD despite BRICS launching a de-dollarization agenda.
Investing reported that UBS still maintains an optimistic outlook on the continuous dominance of the US dollar as the world's main reserve currency even as the global currency landscape changes.
According to UBS, the USD will remain the foundation of the global monetary system in the near future. Despite growing concerns about the USD's sustainability, analysts point to a number of factors that will strengthen the greenback's dominance in the coming years.
First is a solid global monetary system. Historical context shows that the change in dominating currencies is taking place gradually. Despite economic and political changes, the USD has maintained its position as a reserve currency.
Second is the uneven liquidity. The dominance of the US dollar in the global trade, payment and derivatives markets has brought the US dollar unparalleled liquidity, an important factor for reserve managers.
Third is stability and safety. Despite acknowledging the US's domestic challenges, analysts said the country remains highly regarded for institutional strength indicators such as rule of law and market openness. The USs status as a leading technology innovator further strengthens the countrys appeal.
While the dominance of the US dollar is expected to continue, UBS also mentioned growing pressure on a more diverse monetary system. Increased geopolitical tensions, along with efforts by countries like China to localize the yuan, are contributing to this trend.
"In general, we see the dominance of the US dollar as continuing," the analysts said. At the same time, it could create some space for competitors.
However, UBS believes that these initiatives are still in the early stages and are unlikely to pose a significant challenge to the dominance of the greenback in the near future.
UBS believes gold is an important asset for investors looking to diversify their portfolios away from the US dollar. Factors such as increased central bank purchases, lower US interest rates and recovery in ETF demand are expected to push gold prices to $2,600/ounce by the end of the year.
UBS also highlighted golds role as a hedge against geopolitical risks, financial concerns and inflation.
In addition, UBS recommends the Swiss French dollar as an alternative to the USD, citing the limited monetary policy of the Swiss National Bank and the attractiveness of this currency as a safe haven.
UBS noted that while geopolitical risks do not immediately threaten the dominance of the US dollar, rising geopolitical tensions could accelerate a shift to a multipolar currency system.
