The main goal of the BRICS group of emerging economies is to replace the USD with local currencies and promote developing countries as the driving force of the global economy.
However, Switzerland's 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 continued dominance of the USD as the world's primary reserve currency even as the global monetary landscape changes.
According to UBS, the USD will remain the cornerstone of the global monetary system in the near future. Despite growing concerns about the sustainability of the USD, analysts point to several factors that will bolster the greenback's dominant position for years to come.
First is the robust global monetary regime. Historical precedent shows that changes in dominant currencies occur gradually. Despite economic and political changes, the USD has maintained its status as the reserve currency.
Second is unparalleled liquidity. The dominance of the USD in global trade, payments, and derivatives markets provides the USD with unparalleled liquidity, a crucial factor for reserve managers.
Third is stability and safety. While acknowledging the domestic challenges of the U.S., analysts note that the country still ranks high on institutional strength indicators such as the rule of law and market openness. The U.S.'s position as a leading technology innovator further enhances its appeal.
While the dominance of the USD is expected to continue, UBS also mentions increasing pressure for a more diversified monetary system. The rise in geopolitical tensions, along with efforts by countries like China to internationalize the yuan, is contributing to this trend.
Analysts said: "Overall, we believe the dominance of the USD will continue. At the same time, it may create some space for competitors."
However, UBS believes these initiatives are still in their early stages and are unlikely to pose a significant challenge to the greenback's dominance in the near future.
UBS views gold as an important asset for investors looking to diversify their portfolios away from the USD. Factors such as increased central bank purchases, lower U.S. interest rates, and recovering ETF demand are expected to push gold prices to $2,600 per ounce by the end of the year.
UBS also emphasizes gold's role as a hedge against geopolitical risks, financial concerns, and inflation.
Additionally, UBS recommends the Swiss franc as an alternative to the USD, citing the Swiss National Bank's restrictive monetary policy and the currency's appeal as a safe haven.
UBS notes that while geopolitical risks do not pose an immediate threat to the USD's dominance, increasing geopolitical tensions could accelerate the shift towards a multipolar monetary system.
