Although the central part of the agreement is the Japanese commitment to exchange the U.S. dollar for Indian rupees, the Japanese yen is one of five currencies included in the IMF`s SDR basket, which is considered a strong global currency. The currency exchange agreements of India and Japan appear to be the exchange of reserve currency (dollar) against non-reserve currency (rupees). Financial markets are complex and the U.S. dollar remains the preferred currency. But countries have followed the contradictions of Trump`s policy – such as raising the debt ceiling to keep the dollar as the world currency, and even concealing loans to some foreign banks – and they have decided that they must protect themselves from this militarized dollar. Russia and China have taken several steps, such as cross-border payment systems for banks parallel to SWIFT. Both have increased their gold stocks to support their currencies and have launched national swat-change agreements in several regional and bilateral agreements in which they play a role. According to initial reports, the swap, in addition to the Japanese yen and the Indian Rube, is a U.S. dollar. As part of the agreement, the Bank of Japan (Central Bank of Japan) will accept the rupees and give the dollar to the Reserve Bank of India (RBI), and the RBI will take the yen and give dollars to the Bank of Japan to stabilize the other currency.
The swap is worth two billion VAE dirhams or 35 billion Indian rupees ($495 million), according to the Indian Embassy in Abu Dhabi. China is reducing its share of U.S. Treasury bonds and preparing for currency exchanges under the Belt and Road Initiative (BIS) and the Comprehensive Regional Economic Partnership with Southeast Asian countries. Most ASEAN countries are ready to do so. The New BRICS Development Bank proposed payments in national currency in 2015. At the annual meeting of the BRICS Finance Ministers` Board of Governors in April 2020, Bank President K.V. Kamath said that by 2019, a quarter of the $15 billion in financial assistance in local currencies had been provided. Kamath stated that the BRICS had no intention of destabilizing the dollar, but that „50% of the projects should be financed in local currency.“ What is this cash swap arrangement (CSA)? This agreement between two friendly countries, which have regular, substantial or growing trade, consists mainly of acting in their own local currencies, where import and export trade pay at the exchange rates set in advance, without introducing third country currency such as the US dollar. „The bilateral currency exchange agreement between India and the United Arab Emirates should reduce dependence on hard currencies such as the U.S.
dollar,“ he added, adding that the two central banks had accepted the agreement. It is always desirable for a developing country such as India to enter into a currency exchange agreement with countries such as the United States, the United Kingdom and Japan, whose currencies are hard currencies (used as a means of exchange in international trade). The real advantage of the currency swap agreement is that the RBI will have access to $75 billion in foreign exchange at a time when India`s current account deficit factors are strengthening.