Last Monday, I had the chance to welcome Hiro Ito for a research seminar at the University Paris 8. We had interesting discussions about this provocative question: Can the BRICS really challenge the US dollar?
This question may appear provocative. But, let me add two elements that could push you into some unexpected directions.
First, there is a tension in the current international system, as Hiro told us. The weight of the US economy in the world GDP is declining. Besides, the US dollar appreciates during episodes of high financial stress, as the US assets are perceived as the safest assets. The Japanese Yen or the Swiss Franc can be temporary safe havens, but when things become serious everybody goes to the US dollar. In addition, the second most important currency, the euro, or a new potential currency backed by the BRICS do not have (or will not have this safe haven property), mainly because they are not (geo-)politically consistent group of countries. For the BRICS group, the limited financial depth is a big limitation.
Second, the inertia principle in the dominance of an international currency is a crucial factor. As shown by the works of Barry Eichengreen and his co-authors, the US overthrown the UK in terms of GDP far before the US dollar became the dominant currency, see this post. In addition, there is a contradiction / a tension between the international role of the US dollar and the fact that the Fed is primarily concerned with domestic objectives (and, more recently, geopolitical objectives), as Hiro underlined during his talk. Consequently, the dynamics can be highly nonlinear and periods of apparent tranquility can be followed by brutal changes in the realm of global currencies.