BORSAGUNDEM.COM – FOREIGN NEWS SERVICE
With the US Federal Reserve’s (Fed) tight monetary policy since early 2022, the US dollar has reached levels not seen in global markets for 20 years. As investors adopted the view that the dollar has no alternative, predictions that the dollar’s rise would continue spread.
But Rockefeller International President Ruchir Sharma says the dollar may be near its peak. Sharma, writing in the Financial Times, drew attention to the rally in the currency markets twenty years ago:
“Even as US stocks fell with the dotcom bubble burst, the dollar continued to rise. The dollar’s decline, which began in 2002, continued for six years. Such a turning point could be approaching. And this time the fall of the US currency could take even longer. “
Borsagundem.comAccording to information gathered by, the dollar gained more than 20 percent against the major world currencies. The currency passed its peak in 2001. Sharma points out that a typical dollar bullish cycle lasts about 7 years. The current cycle of ascension has lasted for 11 years. Sharma added that the imbalances in fundamental data are also for the dollar. ‘a bad sign’ states that:
“The continuing current account deficit of more than 5 percent of gross domestic product is a credible signal of the arrival of the financial crisis. This situation is mostly valid for developed countries where crises are rare and concentrated in crisis prone countries such as Spain, Portugal and Ireland. The US current account deficit remains close to the 5 percent threshold, which has only been breached once since 1960. This was last seen during the dollar’s fall after 2001. “
National currencies have weakened with rising inflation around the world. Sharma pointed out that the United States currently owes the world $ 18 trillion net. The figure represents 73 percent of US GDP, well above the 50 percent threshold that predicted past currency crises.
Finally, the Rockefeller executive pointed out that investors tend to move away from the dollar as the US economy slows relative to the rest of the world. Although the United States has grown significantly faster than the average of other developed economies in recent years, Sharma predicts that the world’s largest economy will grow more slowly than its competitors in the coming years.
Will the dollar keep its reserve currency status?
Sharma also discussed whether the dollar’s reserve status in international currency markets will continue for long. The Rockefeller executive made the following statements:
“15. Since the 19th century, the last five global empires have issued world reserve currencies for an average of 94 years. The dollar has held reserve status for over 100 years, so its reign is already older than most of its predecessors. “
“The dollar has been strengthened by the weaknesses of its rivals. The euro has repeatedly been weakened by financial crises, while the yuan is governed by intense pressure from an authoritarian regime. However, alternatives are gaining ground.
In addition to the Big Four (US, Europe, Japan and UK), there is also the category of “other currencies” which includes Canadian and Australian dollars, Swiss francs and yuan. This category now accounts for 10% of global reserves, up from 2% in 2001.
Its earnings, which accelerated during the pandemic, come mainly from spending on US dollars. The dollar’s share in foreign exchange reserves is now 59%, the lowest level since 1995. Digital currencies may seem battered right now, but they remain a long-term alternative.
Meanwhile, the impact of US sanctions on Russia demonstrates how influential the US is in a dollar-led world and is inspiring many countries to step up their search for options. It is possible that the next step is towards blocks of currency, not a single reserve currency ”.
The Rockefeller executive pointed out that the dollar appears to enjoy its safe-haven status in today’s markets, but investors are in no rush to buy US assets. Sharma said investors are reducing risk in each region and keeping the resulting money in dollars.
However, according to Sharma, this does not mean a vote of confidence in the US economy. At the end of his article on the Rockefeller FT executive, “Don’t be fooled by the strengthening of the dollar. The world comes after the dollar “ made statements.
horizontal trend in dollars
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