As the newspaper writes, Although the dollar still remains the global reserve currency, foreign investors are becoming more and more cautious about investing capital in the USA. After years when American markets were clearly outperforming the competition, today the situation is starting to level out and even reverse.
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Political chaos affects confidence in the dollar
The key factor in the weakening of the dollar is the unpredictability of the White House's actions. Sudden decisions regarding tariffs, sanctions and military operations cause nervousness in financial markets. ““There is an instinctive aversion to such political chaos.” – says Robin Brooks from the Brookings Institution, quoted by the daily predicts a further decline in the value of the dollar by up to another 10%.
The sudden increase in gold prices became a symbol of the loss of confidence — by almost 80 percent during the year, which shows that investors are looking for safe assets beyond the dollar.
Donald Trump wants cheap money
Trump is putting pressure on the Federal Reserve to cut interest rates well below the current level of 3.75%. In his opinion, the US should have “the lowest interest rates in the world.” Meanwhile, lower rates mean a weaker dollar as investors move capital to where they can get higher returns.
Financial markets they expect the resumption of rate cuts in June. After Trump announced tariffs in 2025, the dollar, stocks and bonds fell simultaneously, signaling a loss of confidence. Although the stock market recovered quickly, the dollar did not.
More and more foreign investors started hedge against a falling dollarselling it in currency contracts. This further fuels its weakening.
The world outside the US is starting to grow faster
Over the years, the US has attracted capital with exceptionally high rates of return. Now, as the newspaper writes, this is changing:
- S&P 500: plus 14 percent in a year
- Brazil: plus 44 percent
- London, Tokyo, Hong Kong – better results than Wall Street
The economies of Great Britain and Japan are now growing at least as fast as the United States. Industrial metal prices are rising, indicating global recovery.
Can the dollar lose its status as the world currency? Japan's important role
The world's central banks are holding over USD 7.4 trillion in American currency. The US still has the largest and most liquid financial market, an advantage in artificial intelligence, and no real alternative to the dollar. But the trend is changing: the dollar is no longer “the only obvious option.”
If Japan raises interest rates, Japanese investors may start withdrawing money from the US. They almost have it $5 trillion in foreign assets – mainly American ones.
For now, there is no visible outflow, but if it starts, it will be another blow to the dollar.
