Cetoex News – (Kindly schedule for Sunday 7:30 pm IST) BRICS is not the only group of countries that are looking to end reliance on the U.S. dollar in 2023. A new bloc of ASEAN countries has come forward and agreed to ditch the dollar for global trade. The ASEAN alliance is looking to promote their native currencies for cross-border transactions by sidelining the USD. The leaders of 10 Southeast nations recently signed a declaration to stop using the U.S. dollar for international trade and aim to promote their local currencies instead

ASEAN is a bloc of 10 countries that compromise Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. Therefore, after BRICS, it is the ASEAN bloc of countries that is looking to follow suit.

The 10 nations have jointly accepted to reduce U.S. dollar payments and increase global settlement in native currencies. Moreover, international trade will be settled within the existing bloc of 10 countries and not with other nations out of the ASEAN alliance.

The move will bolster the power of ASEAN nations’ local currencies and lead the U.S. dollar into a gradual decline. This is one of the few steps taken by developing Eastern nations to take on the dollar. Also, if the momentum continues, many other developing could join together to end the U.S. dollar dominance.

5 BRICS & 10 ASEAN Countries Take on the U.S. Dollar

The official declaration of the ASEAN countries states that the bloc will advance local currencies and not the U.S. dollar. The declaration is signed and accepted by the respective nations’ leaders and remains in full force. Additionally, ASEAN nations said that their goal is to strengthen bilateral and multilateral payment activities among each other.

“We adopted the ASEAN Leaders Declaration on advancing regional payment connectivity and promoting local currency transaction to foster bilateral and multilateral payment connectivity arrangements to strengthen economic integration by enabling fast, seamless, and more affordable cross-border payments across the region,” the declaration read.

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Cetoex News – In a new interview with Fox Business, Senator Rand Paul says that, amidst the BRICS nations’ fight, the US dollar is in a precarious position. Specifically, Paul noted that recent foreign policies have worked to bring together the nation’s adversaries.

The de-dollarization efforts of the BRICS alliance have been a theme for the past few months. Moreover, global economic power has shifted, with the Chinese yuan gaining relevance in international settlements. Alternatively, the greenback is facing a growing demand to see its reserve currency status stripped.

BRICS Currency a Result of Foreign Policy?

The BRICS nations and their growth have been a vital development this year. Moreover, the collective has called for the end of the dominance of American currency. Subsequently, they aim to develop their own alternative currency for intentional trade purposes. 

However, one American politician believes that the year’s development is a self-fulfilling prophecy. Specifically, Senator Rand Paul says that the BRICS nations’ actions against the US dollar have put them in a precarious position. While being driven by the country’s own foreign policy. Conversely, sanctions placed against Russia by the West set in motion much of the de-dollarization efforts that have taken place this year. 

Paul stated, “When you look at the determination of the world’s trade, quite a bit of it, more than we’ve had for quite some time, is denominated in things other than the US Dollar.” Additionally, he noted that “foreign policy has something to do with that, too.”

“We pushed all of our adversaries farther and farther away from us and closer and closer together. It’s not just China and Russia being pushed together by foreign policy. Obviously, some of it is their own doing, and it’s a response to things they’ve done that we don’t like.” 

Moreover, Paul divulged his belief that the fiscal policies of the US have also driven current de-dollarization. Specifically, he stated, “If you treat your dollar like scrap paper and you continue to buy up enormous amounts of US debt, your dollar becomes worthless, too.” 

Conclusively, Paul noted a combination of the two that created the current predicament. Ultimately, he remarks that “it is not an unfounded prediction to say,” that the US could lose its reserve currency status.

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Cetoex News – The U.S. dollar’s downfall has been anticipated by several proponents in 2023. Several believe that de-dollarization could come to fruition sooner or later. Amidst this, it was highlighted that alternative investment methods or currencies could take the front stage. With the decline of the dollar, the common notion is that traditional investment tools like stocks and bonds could underperform. Bitcoin [BTC] and the rest of the crypto market are expected to benefit from the same. However now, another notion was coming to play where shorting the dollar could prove to be detrimental to the digital asset industry.

The de-dollarization initiative put forth by BRICS has led to several members setting up short contracts against the U.S. dollar. Billionaire investor, Stanley Druckenmiller recently revealed that he has shorted the greenback. He was even confident about his bet as he said,

“One area I’m comfortable with is I’m short the U.S. dollar. Currency trends tend to run for two or three years. We have had a long [run] higher.”

This bearish bet on the most powerful currency in the world has led to the formation of a “double bottom” price floor which could lead to a possible short squeeze. Options trading firm, QCP Capital highlighted how this could impact the Bitcoin-led crypto market.

“The biggest obstacle for crypto remains the USD – where we think the market is heavily positioned to the short side and vulnerable to a short squeeze, which could take BTC/ETH and Gold lower in response.”

Furthermore, the dollar index and Bitcoin have typically gone in opposite directions. The king coin and the larger market might be affected by a short squeeze in the dollar given the recent strengthening of their negative association.

Here’s how the dollar could avoid a potential short squeeze

Data shows that investors anticipate that the Fed will start cutting rates in July after delivering it’s final 25 basis point rate boost later today. QCP went on to note the factors that could set the stage for a short squeeze. The analysts further stated,

“Looking at the Fed pricing, you can certainly say the pivot is fully priced in. It is the U.S. banking crisis/debt ceiling/recession that is the beta for the USD from here. We believe that the 12% drop in the USD is pricing in the more pessimistic scenarios on these three and which we believe make it ripe for a short-term squeeze.”

Additionally, Druckenmiller also noted how the dollar has dropped by 10% since November 2022. He pointed out that this downturn will continue unless the Fed starts cutting interest rates.

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