Gee, for all this talk about losing faith in the greenback and a desire to create some new, global reserve, foreign government still like themselves some dollar.
All the biggies are still accumulating dollars like crazy, in hopes of keeping their currency low, and their exports affordable:
Bloomberg: The BRICs are buying dollars at the fastest pace since before credit markets froze in September, protecting exports even as leaders of the biggest emerging markets consider alternatives to the U.S. currency.
Brazil, Russia, India and China increased foreign reserves by more than $60 billion in May to limit currency gains as the first global recession since World War II restricted exports, data compiled by central banks and strategists show. Brazil bought the most dollars in a year, India’s reserves gained the most since January 2008 and Russia added the most foreign exchange since July.
To some extent, if one country buys dollars to depress their currency, the rest are forece to follow no matter what. It’s a game theory thing. If they’re going to get off this currency treadmill, they’ll need to coordinate together. Kind of like OPEC. To some extent, that’s going on:
Russia is proposing the BRICs consider creating a new unit of exchange when they meet in Yekaterinburg on June 16. China and Brazil said last month they may look at ways of dropping the dollar for trade between the two countries.
Is that going to happen? No, probably not. But if the US consumer continues to sink and delever (probably will) the need to relentlessly base a country’s financial strategy around being weaker against the dollar makes less and less sense.