The dollar still standing despite growing doubts – Daniel Moss

Key topics:.The dollar remains central, used in 90% of FX transactions.No viable alternative currency challenges the greenback's supremacy.Economic shifts may weaken it, but a full collapse is unlikely..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here..If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Daniel Moss___STEADY_PAYWALL___.It's again fashionable to be down on the dollar. After a great run the past few years, the prevailing sentiment is now one of anxiety. Not just about the greenback's short-term prospects, which have always tended to ebb and flow with projections for economic growth, but about the durability of the unique role it has played in world commerce since at least 1945..You can hold the obituaries, plenty of which have been drafted and all but retracted over the decades. The dollar is integral to global finance — it is involved in almost 90% of all transactions in the $7.5-trillion-a-day market for foreign exchange. The longevity of its dominance depends not just on sentiment toward the occupant of the White House at any one point in time, but whether a viable alternative comes along that offers all of the advantages of American capital markets and displays few disadvantages of its own. China's yuan isn't remotely there yet..Don't be too quick to write off US exceptionalism. The dollar, one of the proxies for that singularity, isn't going quietly from its position at the apex of the global monetary system. That's different from saying there won't be changes in its valuation against the euro, yen or UK pound from time to time in response to the shifting outlook for prices and jobs. (It's down against all three so far this quarter.) For all its flaws, the greenback is a must-have. Any rupture in its primary role would cause tremendous upheaval and harm foreign buyers of US debt, of which China, Japan and European countries are among the most significant. .The US currency does face some important contemporary challenges: President Donald Trump's ambivalence toward alliances, his intent to undo — or at least refashion — the international trading system, and a desire to exert some influence over how interest rates are set. The world is bracing for broad tariffs to be announced next week; the administration's on-again-off-again imposition of levies on Canada and Mexico is undermining confidence. Gaming out scenarios that envisage a post-dollar era has become popular, especially since Germany cast aside its aversion to significantly ramping up stimulus.. The last week certainly hasn't been kind. A widely watched Bank of America Corp. survey found holdings of US stocks fell by the most on record, and a strategist at the firm declared that the equities version of American exceptionalism has peaked. Barry Eichengreen of the University of California, Berkeley, one of the foremost experts on the rise and fall of currencies, wrote an essay in the Financial Times that questioned the major underpinnings of the dollar's supremacy. Bearish bets are piling up, according to Commodity Futures Trading Commission figures. .Read more: 🔒 Euro faces parity with Dollar amid economic strains: Marcus Ashworth.It's enough to make me nostalgic for the early 2000s, when I was based in London and responsible for currency news at Bloomberg. It was the early days of the euro, and a time when markets appeared obsessed with large US trade deficits. The combination was often said to be toxic, if not terminal, for the dollar. The general point was that faith in the US was waning. People didn't like George W. Bush and the invasion of Iraq was particularly unpopular in Europe. Surely, after a few false starts, the dollar's eclipse was assured..It didn't happen. History is littered with examples of blowups that were supposed to have led to the demise, but fell well short: The end of the Bretton Woods system of fixed exchange rates, the rise of Japan and China, the subprime collapse of 2008. In times of trouble, the dollar has often strengthened, not gone backward. .None of this argues for complacency. Hegemony brings with it big risks, as well as great power. The more the US appears intent on waging economic warfare on friends and foes alike, the greater the incentives to look for alternatives. And, as Eichengreen wrote, the only true global currency has owed no small part of its resilience to relationships cultivated by the US over the years, commitments made to partners, a willingness to uphold the rule of law, and the independence of the Federal Reserve. These foundations are under strain. .The would-be usurpers have their work cut out, however. The dollar's status as first among equals developed over decades and is buttressed by the deep and liquid market for US treasuries, as well as the reach of American banks. The dollar has an outsized role in invoicing, and the size of the nation's economy is a big asset. .Elevating another currency or medium of exchange to the same sphere of influence is a herculean task. In an address to the Center for Strategic & International Studies last week, Paul Blustein, author of the new book King Dollar: The Past and Future of the World's Dominant Currency, said that wishing for the dollar to fall from its perch doesn't make it likely. Blustein, no fan of Trump's approach, described the dollar as not just dominant but entrenched. He even said he wishes it weren't so, because it enables bullying of the kind dished out to close allies like Canada. Something truly catastrophic would have to occur for the dollar to lose its underlying appeal. .The greenback may well have a soft year compared with other major currencies, and it's prudent to position for a possible recession. But it will take more than antipathy toward the president to create a new FX world. Go ahead and short the buck, just don't plan on a funeral anytime soon. .Read also:.🔒 The Economist: The blistering rally in gold augurs ill for the power of the dollar🔒 King Dollar's reign weakens as greenback falls 5%: Marcus AshworthAmerica's 'exorbitant privilege' is alive and well: Jamie McGeever.© 2025 Bloomberg L.P.

The dollar still standing despite growing doubts – Daniel Moss

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