Indian-american Relationship

Great question @lavani,

At least we have one experience of common currency in Europe called Euro. The way they did it was to agree on a date that each currency value to be evaluated against a basket of currencies and come up with the exchange rate between currencies of respective countries and Euro. After that most countries dealt with Euro regularly besides their own currencies. Those who are joining late, their exchange rate will be market driven as Euro already is marketed in the currency market on a daily basis.

I assume if BRICS countries agree on a new currency for (example named as "BRICS'), each member country's central bank would agree on value exchange with their own currencies and allow BRICS to be accepted in each country for trade settlements. Even tourists must be allowed to give BRICS as a currency when they travel in the member countries. Once it is traded as a new currency, it establishes its own market in currency exchanges. The power of BRICS currency will be dependent on how the member countries' currency appreciates relatively against other countries. That is generally an appraoch in open market strategy as most Western European nations and the US have free float of currencies meaning anyone is allowed to buy their currency unlimited based on the current value. However, countries like India and China have regulations to allow conversion of Rupees/Yuan into foreign currencies and vice versa. If an international company makes money in India or China, there is a limit up to which they can transfer that earnings into their parent country. Capital account conversion is not free and it is limited. This is implemented so that their currencies are not too much exposed to fluctations in the market.