Five questions about the dollar: What threats does Trump pose? Will there be a BRICS currency? What will the exchange rate look like in 2025?

Question 1. BRICS Currency: Should We Expect a Competitor to the Dollar?

During the BRICS meeting in Kazan, Russia, discussions were held regarding an alternative payment system that could compete with SWIFT. Additionally, there were talks about a potential new currency that could allegedly challenge the dollar in the global financial market.

Question 2. Trump's Statement: Are the US Ready for New Measures Against BRICS Countries?

The newly elected US President Donald Trump recently threatened to impose 100% tariffs on goods from BRICS countries if a new currency is established. According to him, "there's no chance that BRICS will replace the US dollar in international trade, and any country that tries should wave goodbye to America."

Experts argue that neither the Communist Party of China nor the Brazilian government will risk facing 100% tariffs from the US over illusory ideas from Russia.

In essence, Trump is demanding that countries cease attempts to initiate the creation of a new currency, or the US will impose 100% tariffs on their exports.

According to Ivan Uglynitsa, Trump is currently threatening many countries with tariffs, from Mexico and Canada to China and Europe. "It’s hard to ascertain how much of this is based in reality or if it's merely an aggressive negotiation tactic. I see this as a void on both sides. There is no real threat from the hypothetical BRICS to create such a currency or to utilize one of the currencies from BRICS countries for this purpose, just as there are empty threats regarding a non-existent risk of such a currency emerging; it’s purely political PR from both sides,” the expert notes.

Question 3. Are There Threats to the US Dollar?

The dominant position of the dollar as the main currency for transactions worldwide is likely to persist for a long time. However, the risks of the dollar gradually losing its footing do exist.

"I believe that the US, like other countries before it, is on a path where the dollar will gradually lose this role, potentially being replaced by another currency or currencies, or the dollar will start to lose its significance in transactions and reserves. The main issues are internal; external factors like competing currencies, etc., highlight existing problems. The US should not worry about the statements from BRICS but rather focus on why these statements arose and what is happening within the US and the Western world. It’s about a crisis in their socio-political system, which will gradually undermine the status of the dollar as the primary global currency,” says Ivan Uglynitsa.

According to financial analyst Andrey Shevchishin, some risks to the dollar as the primary currency for transactions have been created by the US itself, whose national debt is rising to unprecedented levels. As reported by the US Department of the Treasury, as of January 2, 2024, the national debt reached $34.001 trillion. "The risk is associated with trillions of US debt, which is sustained by new debt being raised from other countries invested in US bonds. But what if they stop investing? The risk of increasing the cost of servicing national debt rises, which will be a real burden for the US budget," says Andrey Shevchishin.

Still, in the next 10 years, Vitaly Shapran notes, the dollar's role as the primary currency in the world will remain. Therefore, there is no need for the US to be concerned about the statements from BRICS, according to the expert, although it makes sense for the US to leverage Putin's absurd initiatives to assert itself as the dominant force in the global economy.

Question 4. What is Happening in the Ukrainian Currency Market in Early December?

On December 2, the National Bank of Ukraine established the official exchange rate at 41.58 UAH per dollar, while a month prior, on November 2, the rate was at 41.22 UAH/USD.

Power outages and general expectations of devaluation have heightened the demand for foreign currency.

At the end of November 2024, the demand for foreign currency on Ukraine's interbank currency market significantly increased. "This trend has many components: the transition date when most Ukrainians receive regular income, substantial repayments of previously issued government bonds, and the return of power outages due to massive infrastructure shelling, which further raises anxiety among Ukrainians. Additionally, general devaluation expectations, which traditionally increase in December due to anticipated additional pressure on the hryvnia from elevated budget expenditures at year-end," explained Anna Zolotko, director of treasury operations at Unex Bank.

The expert reported that last week, the average daily trading volume on the interbank market exceeded $213 million, which is $20-30 million higher than the "standard" figures of recent months. The National Bank increased interventions during the week to $708.5 million, which is $118.5 million higher than the figures from the previous week. At the start of the first trading days in December, the cost of the US dollar in the interbank market reached 41.69 UAH/USD.

One of the key reasons for the weakening of the exchange rate is the conclusion of the calendar period, the closure of foreign economic contracts, and increased budget expenditures. All of this, Anna Zolotko says, affects the demand for currency.

It is also important that the population continues to buy foreign currency. This is explained by heightened devaluation expectations. "In the first 28 days of November, net purchases of foreign currency amounted to $1.227 billion, which is not much lower than the figures for October. Everyone is trying not to delay purchasing currency, which leads to concentrated demand and stimulates the rise in the exchange rate," says Anna Zolotko.

Question 5. What Will the Exchange Rate of the Hryvnia Be in 2025 and What Will Influence It?

For 2025, experts predict a devaluation of the hryvnia. However, the depth of the hryvnia's decline depends solely on military-political factors—whether the hot phase of the war continues or stops and the amounts and regularity of international financial aid.

During the war, the population of Ukraine has accumulated an additional more than $14.7 billion.

"Currently, political factors predominantly influence the exchange rate of the hryvnia, as the availability of sufficient Western assistance is a political issue, just as the utilization of this assistance to maintain the exchange rate. Since Ukraine is critically dependent on external assistance, which is based on political decisions and local politics, this dependence will persist in 2025, possibly even intensify with a potential end to the hot phase of the war, when aid volumes may be reassessed, leading to increased pressure for price liberalization, currency restrictions, and exchange rates, among other things. Another factor could be a global recession or similar events, increasing the demand for dollars, which negatively impacts local currencies, particularly the hryvnia. The fact that there are formal prohibitions on capital movement in Ukraine does not significantly curb this demand; it may even necessitate a faster depreciation of the exchange rate even with the current situation regarding external financial support," says Ivan Uglynitsa.

The depth of the hryvnia's decline in 2025 depends solely on military-political factors.

According to Anna Zolotko, discussing potential exchange rate levels for the next year without considering military issues and security risks is impossible. "For instance, it is quite likely that next year they will significantly weaken or even be neutralized. In such a case, the National Bank may have to exert efforts to prevent the hryvnia from appreciating too much. I understand that such a scenario may seem fantastical now, but during the war, Ukrainians alone have accumulated more than $14.7 billion. This amount represents net purchases of currency by the population even without considering November's data. A substantial portion of these funds effectively represents deferred demand. Once security risks decrease, a significant portion of this money will enter the currency market in a relatively short time and exert pressure on foreign currency. Not to mention the expected investments, return of Ukrainians, etc.," says Anna Zolotko.

According to her, even if we consider a moderately pessimistic scenario, the National Bank has sufficient resources to support the national currency next year. "This does not mean that the exchange rate will be absolutely stable. However, it should be noted that the regulator primarily addresses price stability. And from today’s perspective, noticeable devaluation poses significant risks to that. Therefore, the National Bank needs to actively work on this issue, again not resisting market trends too much to avoid accumulating additional risks," the expert believes.