When U.S. allies like Canada and France grumble about overuse of the U.S. dollar, and as Washington’s rivals like Iran start trading in cryptocurrencies and the Chinese yuan, it can be easy to argue that the world is edging away from the greenback. The U.S. dollar’s share of global foreign exchange reserves has fallen from 71% in 1999 to 57% in 2024, its lowest level in a quarter century.
But economists at Standard Chartered aren’t convinced.
“We’re not really in this de-dollarization camp,” Divya Devesh, Standard Chartered’s co-head of FX research for ASEAN and South Asia, said during a July 15 press briefing at the bank’s Singapore office. Instead, companies and investors are still clinging to the U.S. dollar.
“I actually see re-dollarization in the form of exporters keeping dollars, and investors still finding U.S. equities very attractive to invest in,” Devesh said. He pointed out that Taiwan, for example, only converts $2 out of every $100 in export earnings into the New Taiwan dollar. The rest, he added, are mainly kept as U.S. dollars.
Devesh’s views are at odds with a growing chorus of economists and commentators who fear that U.S. government debt, Washington’s use of sanctions and tariffs, and non-dollar trade could undermine the U.S. dollar’s status as the world’s most important currency.
Asia’s governments are actively de-risking from the USD, with central banks aggressively expanding their gold reserves. The People’s Bank of China, for instance, has pushed for multi-month buying sprees, while the Reserve Bank of India has repatriated roughly 100 tonnes of gold back to domestic vaults.
Standard Chartered’s economists acknowledged that the U.S. federal debt burden could worsen, but argued that many other countries face the same fiscal challenges.
“You can have a negative view on Trump, twin deficits, or the U.S. budget trajectory,” said Eric Robertsen, Standard Chartered’s chief strategist and global head of research. “But if you sell U.S. dollars, you have to buy something else, and the alternatives out there are not very attractive.”
He framed the bond market, not the foreign exchange market, as the main outlet for fiscal concerns. “I don’t think the dollar is going to lose its safe-haven status in the near or medium term simply because of the budget deficit,” he said.
“In the aftermath of tariff announcements last year, there was a significant amount of dollar selling, or FX hedging, largely by European investors hedging their dollar assets,” Robertsen explained. “Now that the Fed is not cutting rates and the U.S. economy [is] displaying some resilience, the idea of U.S. outperformance is gaining some traction again.”
Productivity gains in the U.S. are also strengthening the U.S. dollar. “It’s not just in the AI industry. Broader productivity gains across the U.S. should translate into better earnings, and subsequently into more capital flows going into the U.S.,” Devesh concluded. “The demand for U.S. assets from foreigners is also still very strong, and that’s the underlying driver which keeps the dollar quite resilient.”
Angelica Ang
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