Source:
Summary
Economists at Standard Chartered are not convinced that the world is edging away from the US dollar, despite its share of global foreign exchange reserves falling to 57% in 2024. Divya Devesh, co-head of FX research, notes that companies and investors are still clinging to the US dollar, with exporters keeping dollars and investors finding US equities attractive. Devesh points out that Taiwan, for example, only converts a small portion of its export earnings into its local currency.
Our Reading
The numbers tell one story. Standard Chartered’s economists acknowledge the US federal debt burden could worsen, but argue that many other countries face similar fiscal challenges. Eric Robertsen, chief strategist, frames the bond market as the main outlet for fiscal concerns, not the foreign exchange market. He notes that the idea of US outperformance is gaining traction again, driven by productivity gains in the US.
The strategy enters a familiar phase. Devesh concludes that the demand for US assets from foreigners is still strong, keeping the dollar resilient. Robertsen’s view is that selling US dollars means buying something else, and the alternatives are not attractive.
Key Points
- US dollar’s share of global foreign exchange reserves has fallen to 57% in 2024.
- Standard Chartered’s economists argue that companies and investors are still clinging to the US dollar.
- Exporters, such as Taiwan, keep a large portion of their earnings in US dollars.
- US federal debt burden could worsen, but other countries face similar fiscal challenges.
- Productivity gains in the US are strengthening the dollar.
Original Observation
The US dollar’s resilience is not just about its own strength, but also about the weaknesses of its alternatives.
Author: Evan Null
