DOT Desk: Nine central banks linked to a South Asia-focused clearing house have reached a consensus to settle trade in local currencies, including the Indian rupee, to reduce dependence on the US dollar and the euro,reports Daily Sun.
All the members of the Asian Clearing Union, which includes all South Asian countries as well as Iran and Myanmar are on board with the plan, said Khaing Shwe War, director general at the Central Bank of Myanmar.
A formal announcement is likely in the next few months, according to people familiar with the matter. India will likely lead in the settlement of trades in the ACU, which had transactions worth $28.8 billion in 2021, a surge of nearly 55% in a year.
The South Asian country controls nearly 93% of the ACU’s credit positions as of May, making it the most influential member in the group. The arrangement is one of the few deals being worked out by India to globalize the rupee and make it more acceptable for international trade settlements.The change is part of an emerging global movement to form trade blocs that rely less on the dollar.
Movements in the US dollar can weaken emerging market currencies fast, and “all the ACU member states dislike it,” said Khaing Shwe War, who is also an official with the clearing house. “Reducing reliance on US dollars has become our common goal.”Under the proposed plan, transactions will be invoiced in local currencies and settled once in two months, said the people who asked not to be identified as the discussions are private.