A basket of currencies may be created to help trade between BRICS countries

Achieving a BRICS common currency may be a distant goal at the moment, but there is another approach that is gaining attention: the creation of a basket of currencies. This approach aims to facilitate smoother trade and economic cooperation within the EU while addressing the challenges associated with the introduction of a single currency.

Understanding currency basket

A currency basket is a financial instrument that consists of a combination of different currencies. Each currency in the basket has a specific weight determined by factors such as trading volume and economic importance. The value of the basket fluctuates according to the exchange rate of the currencies included in the basket. This concept is commonly used in various financial contexts, such as exchange rate mechanics and foreign exchange reserves.

How the BRICS currency basket works

The idea behind the BRICS currency basket is relatively simple. Instead of adopting a single common currency, the BRICS countries could create a basket containing their national currencies. The value of this basket is based on the exchange rates of his five currencies: Brazilian Real, Russian Ruble, Indian Rupee, Chinese Yuan and South African Rand.