President Donald Trump issued a stark warning on Wednesday, saying that the loss of the U.S. Dollar’s global reserve status would be tantamount to “losing a major world war.”
What Happened: “You ever hear the expression ‘the dollar is king?’ The dollar is king. We're going to keep it that way,” Trump said, while speaking to the media on Wednesday.
However, Thierry Wizman, a global FX and interest rate strategist at Macquarie, believes the shift away from the dollar is already underway, and is happening gradually across financial systems.
“No, the dollar is not still king,” Wiseman said, while talking on Bloomberg’s The Opening Trade on Wednesday, adding that “There's plenty of indications out there that de-dollarization is taking place.”
He pointed to a “slow drip” of changes, including declining allocations to the dollar by reserve managers, foreign lenders asking clients to transact in alternative currencies like the Chinese renminbi, and increased diversification by pension funds and private investors.
“It’s not staring you in the face, and it’s a slow drip,” he says, on why most people haven’t paid much attention to it, and thus live in denial.
Wiseman noted that institutional investors, including pension funds and semi-official entities, are diversifying their holdings in ways that mark a structural shift in the dollar's dominance. He emphasized that this trend is less about cyclical interest rate differences and more about geopolitical disillusionment and declining U.S. policy credibility.
“We may have managed chaos, but we certainly don't have ordered liberty anymore,” he says, referring to the prevailing policy uncertainty and the diminishing stable, rule-based, and predictable order that got foreign investors to trust the U.S. system in the first place.
Asked what could reverse this momentum, Wiseman pointed to the need for renewed U.S. policy stability, trade reengagement, and a reduction in social and fiscal tensions, though he cast doubt on any near-term reversal.
Why It Matters: Despite Trump’s recent statements, a few market experts and analysts believe he views the Dollar’s reserve status as “more of a burden to the U.S. economy than a blessing.”
David Lubin, a Chatham House expert, says this is all part of a policy push by the Trump Administration to permanently weaken the dollar, to narrow the trade deficit, while encouraging manufacturers to return.
Economist Kenneth Rogoff said last week that China is gaining traction in its bid to dethrone the dollar, and this was despite a slowdown in the domestic Chinese economy.
“China doesn’t have to grow at 7% in order to establish the yuan as more of a currency,” he said, highlighting the fact that it is already the largest trading partner for more than half of the countries in the world. “So they’re there. They’ve arrived,” he says.
Price Action: The U.S. Dollar Index (DXY) is up 0.11%, trading at 97.404 on Thursday, against a basket of other currencies. The greenback has, nonetheless, witnessed a steep decline year-to-date, and is currently down 10.27% since the beginning of this year.
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