The Brics group of emerging economies are planning to establish a huge fund to offset the negative impact of the US Federal Reserve's stimulus cut on their currencies.
The group including Brazil, Russia, India, China and South Africa have proposed the creation of a $100bn (€76bn, £64bn) forex reserve pool to control fluctuations in currency markets.
China, the second-largest economy and the holder of the largest foreign exchange reserves, would contribute $41bn to the fund under current plans. Brazil, India and Russia will each add $18bn and South Africa a further $5bn.
However, the scheme would not be functional for some time and requires approval from each country's parliament.
"The initiative to establish a Brics currency reserve pool is at its final stage," Russian President Vladimir Putin said at a meeting of BRICS leaders during the ongoing G20 summit in St. Petersburg.
"Its capital volume has been agreed at $100bn."
Combating US Tapering
The BRICS countries have been enjoying the effects of a weak dollar over the past decade. However the US Federal Reserve's plan to scale back its mammoth monetary stimulus programme has created volatility in the currency markets.
The US central bank is planning a tapering of its market stimulus programme worth $85bn a month. That has affected economies across the world, especially the emerging markets such as India, South Africa and Brazil. In the global financial system, about 62% of reserve assets are in US dollars.
India's currency has fallen by about 20% against the dollar since the beginning of 2013 and has been the worst-performing currency in Asia. Meanwhile the Brazilian real has fallen 16% against the dollar since May, and the South African rand has depreciated 17.7% against the dollar this year.
In contrast the Chinese yuan, which is regulated by the central bank rather than market forces, has strengthened 1.8% so far in 2013.
The new fund is expected to alleviate shocks of the US tapering in the forex market.
New Development Bank
The Brics had earlier proposed the establishment of a development bank with a subscribed capital of $50bn from the member countries. The new bank is expected to provide stiff competition to international lenders including the International Monetary Fund and the World Bank.
The group is currently negotiating the bank's capital structure, membership, shareholding and governance.
The Brics leaders expect tangible results by the time of the next summit in March.
Initially, the Brics thought of helping member countries with difficulties in balance of payments through the bank. The group is now also suggesting an IMF-style credit line for countries to insure against external shock.