The U.S. to lose $150 billion due to the China-Brazil trade agreement: an OctaFX analysis

Another step toward de-dollarisation was taken by Brazil and China this week as they announced an upcoming deal to carry out trade and financial transactions directly, bypassing the U.S. dollar. According to the People's Bank of China, the agreement will boost the use of the yuan for cross-border transactions between businesses and financial institutions, as well as simplify trade and investment between the two countries. China and Brazil will carry out transactions directly through the exchange of yuan for reais and vice versa.

'The impact of China and Brazil's de-dollarisation efforts is significant, as China is Brazil's largest trading partner, accounting for more than a fifth of all Brazilian imports. Conversely, Brazil exports 31% of its goods to China,' said Kar Yong Ang, an OctaFX financial market analyst.

Despite the active pursuit of de-dollarisation, it is unlikely that the U.S. currency will lose its dominant status owing to the significant dollar reserves held by major central banks worldwide. However, a shift towards de-dollarisation is already evident from the growing purchases of gold by central banks, which serves to reduce their exposure to the U.S. dollar. Since March 2023, the dollar has shown weakness against regional currencies, and this trend is expected to continue, possibly leading to EURUSD, GBPUSD, and gold prices rising.

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References

1. ^{^} Media OutReach (www.media-outreach.com)