Capital shifts east deepen confidence crisis in U.S. dollar
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TroibNews 
Growing skepticism regarding the U.S. dollar's dominance has increased as investors shift their capital towards European and Asian markets, as noted by financial experts and policymakers.
Analysts point to a decline in confidence regarding U.S. economic policies, rising geopolitical tensions, and a broader reassessment of America's role in stabilizing the global financial landscape as factors contributing to the dollar's waning influence.
In recent weeks, the U.S. Dollar Index has consistently trended downward, a situation worsened by revised lower growth forecasts and mounting recession risks in the U.S. Industry leaders assert that structural changes in investor behavior, largely influenced by decisions made in Washington, are hastening the currency's decline.
"Normally, when you see big tariff increases, I would have expected the dollar to go up. The fact is the dollar is going down," remarked Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, highlighting this paradox as an indication of changing investor preferences.
Governor of the Bank of France, Francois Villeroy de Galhau, shared concerns regarding U.S. strategies. He remarked that American policies have historically aimed to boost the dollar's dominance. However, recent decisions, especially during the Trump presidency, have compromised that objective.
Credibility in the dollar is weakening not due to economic cycles, but as a result of self-inflicted damage, he added.
"This is not business as usual," said Krishna Guha, vice chairman of Evercore ISI. "When you see yields up, dollar down, there's really only one takeaway, which is you are seeing capital flows out of the U.S. into other markets."
He pointed out that this trend reflects two main issues: the diminishing U.S. growth exceptionalism and the "reduced relative attractiveness" of risk-free dollar assets in a context where the U.S. is "undermining the international economic and security order that the U.S. itself created."
This week, analysts from Deutsche Bank warned that ongoing trade disputes and sanctions have caused lasting damage to the dollar's appeal, contributing to a global trend of de-dollarization.
Additionally, TD Securities noted that diminishing U.S. growth advantages are prompting investors to pivot toward European equities and emerging markets in Asia, where fiscal stability and growth opportunities seem more promising.
Sophie Wagner for TROIB News
Analysts point to a decline in confidence regarding U.S. economic policies, rising geopolitical tensions, and a broader reassessment of America's role in stabilizing the global financial landscape as factors contributing to the dollar's waning influence.
In recent weeks, the U.S. Dollar Index has consistently trended downward, a situation worsened by revised lower growth forecasts and mounting recession risks in the U.S. Industry leaders assert that structural changes in investor behavior, largely influenced by decisions made in Washington, are hastening the currency's decline.
"Normally, when you see big tariff increases, I would have expected the dollar to go up. The fact is the dollar is going down," remarked Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, highlighting this paradox as an indication of changing investor preferences.
Governor of the Bank of France, Francois Villeroy de Galhau, shared concerns regarding U.S. strategies. He remarked that American policies have historically aimed to boost the dollar's dominance. However, recent decisions, especially during the Trump presidency, have compromised that objective.
Credibility in the dollar is weakening not due to economic cycles, but as a result of self-inflicted damage, he added.
"This is not business as usual," said Krishna Guha, vice chairman of Evercore ISI. "When you see yields up, dollar down, there's really only one takeaway, which is you are seeing capital flows out of the U.S. into other markets."
He pointed out that this trend reflects two main issues: the diminishing U.S. growth exceptionalism and the "reduced relative attractiveness" of risk-free dollar assets in a context where the U.S. is "undermining the international economic and security order that the U.S. itself created."
This week, analysts from Deutsche Bank warned that ongoing trade disputes and sanctions have caused lasting damage to the dollar's appeal, contributing to a global trend of de-dollarization.
Additionally, TD Securities noted that diminishing U.S. growth advantages are prompting investors to pivot toward European equities and emerging markets in Asia, where fiscal stability and growth opportunities seem more promising.
Sophie Wagner for TROIB News
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