The US dollar will play no role in the currency swap agreement making local currencies the centerpiece of all transactions. The move comes in line with the BRICS alliance looking to push local currencies first for trade and commerce instead of the US dollar. Read here to know how many sectors in the US will be affected if BRICS ditches the dollar for trade.

China is looking to sign currency swap agreements with 29 developing countries including that of BRICS nations. The currency swap agreement will be worth $553.49 billion in local currency exchange without the interference of the US dollar. The development makes transactions of local currencies in the ‘always trading’ mode on the foreign exchange market.

The bilateral currency swap facilitates trade and investment options by adding a safety net for all local currencies. Each Central Bank can swap its local currencies for another and settle trade with lower exchange rates and fees. The move is a win-win situation for BRICS, China, and other developing countries as they can save costs for cross-border transactions while making use of their local currency.

Pan Gongsheng, Governor of the People’s Bank of China confirmed that the currency swap agreement will take place in 2024. “Bilateral currency swaps can provide emergency liquidity support in times of turmoil in international financial markets and banking crises in some countries,” he said to Reuters.