Unlock the publisher’s digest free
Roula Khalaf, editor -in -chief of the FT, selects her favorite stories in this weekly newsletter.
The status of the US dollar as a paradise for world capital could be threatened by the development of erratic policies and the increase in trade barriers, warned fund managers.
Friday, the motto fell to a three -year hollow against the euro, extending a slide that started last week after President Donald Trump announced “reciprocal” prices raised on American trade partners.
The movements triggered an alarm among the investors, who warned against a “tectonic change” for the global economy if the dollar could no longer be invoked to provide refuge during the periods of volatility on the market.
“There is 1744441775 A very good argument for the end of the exceptionalism of the US dollar, “said Bob Michele, investment director of JPMorgan Asset Management, with $ 3.6 TN under management.
For decades, the relative stability of the US economy has enabled the dollar to operate as global reserve currency – owned by central banks around the world.
This allowed the United States to borrow at low cost and to finance “twin deficits” in the country’s current account and its government budget.
But a simultaneous sale in stocks, bonds and the dollar in recent days, caused by the aggressive commercial program of the president, underline a loss of confidence in American assets among international investors, said funders.
“Trump’s chaotic tariff policy is undergoing the position of the United States as a refuge,” said Bert Flossbach, co-founder and investment director of Flossbach Von Storch, the largest independent active manager in Germany.
“It is certainly possible that an increased political uncertainty in the United States can cause changes in the use of the dollar in the world economy,” said Brad Setser, a member of the foreign relations council.
Edward Fishman, author of Office pointA book on American economic war, said that in addition to Trump’s prices, the president’s threats against the rule of law and the independence of the Fed could also affect the attraction of the dollar.
He predicted that over time, this could lead to a passage to a “multipolar” system in which the currencies, including the euro, play a more important role.
The dollar crisis is particularly unusual because global financial stress generally strengthens currency, because investors rush to dollar assets such as the US Treasury obligations which are perceived as shelters.
Economists have also said that the currency of any country that imposed imports should be strengthened.
Mike Riddell, director of fixed income portfolio at Fidelity International, said the recent longer net decision in the longer -term public bond yields, associated with a lower US dollar, looks like a “good former capital flight”.
However, the economic advisers to the American president in the past have highlighted the costs provided with a strong dollar.
Stephen Miran, president of the Trump’s economic advisers’ council, argued before the president’s inauguration that the dollar status as a global reserve currency had artificially inflated the exchange rate, undermining the global competitiveness of American manufacturing.
Economists have challenged Miran’s argument and raised concerns that his reasoning could lead the Trump administration to take other measures to depress the value of the dollar.
Michael Krautzberger, World CIO of fixed income at Allianz Global Investors, said: “The more the conflict degenerates, people think, what could be the next steps?”
