Brazil, Russia, India and China are considering buying each other’s bonds and swapping currencies to lessen dependence on the U.S. dollar as their leaders meet for a summit in Russia’s Ural Mountains.
The leaders of the so-called BRIC countries will discuss measures to promote regional currencies, including “possibly placing part of reserves in the financial instruments of partner countries,” during their meeting in Yekaterinburg, Arkady Dvorkovich, Russian President Dmitry Medvedev’s top economic adviser, told reporters.
The BRIC countries have combined reserves of $2.8 trillion and are among the biggest holders of U.S. Treasuries. The first BRIC summit comes after Brazil, China and Russia announced plans to shift some foreign reserves into International Monetary Fund bonds, driving Treasuries and the dollar lower.
“This is not something for the immediate future, but rather a direction of movement,” said Stanislav Ponomarenko, a fixed-income analyst at ING Groep NV in Moscow. “I don’t think more than a few percent of reserves could be reinvested into BRIC bonds. What we’re seeing is a continuation of discussions to find an alternative to the dollar, yet nobody is going fundamentally to alter anything yet.”