Also, one long-running speculation has been that the BRICS nations ultimately want to form their own currency as an alternative to the U.S. dollar and the euro. This could reduce demand for the dollar as a reserve currency, which could lower the dollar's value relative to other currencies. A strong currency is a double-edged sword -- it makes imports cheaper but makes a nation less competitive on an export basis. Also, a weaker dollar would somewhat tie the Federal Reserve's hands on policy decisions, such as the current low-interest-rate approach.It's possible that with stronger currency competition, the U.S. would have to offer higher interest rates to support the dollar. Depositors in savings accounts, CDs and money market accounts might love that outcome, but if it came about too suddenly it could be very disruptive to the economy.
BRICS And Stones: Should An Emerging Alliance Worry The US?
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