Most METARs live in the U.S. so we use USDs every day. The status of the USD as the world’s reserve currency enables us to buy imports for a lower price. Interest rates are held down since foreign countries hold massive amounts of Treasuries to finance their international transactions.
Companies that sell internationally become less competitive when the dollar is strong so a strong dollar potentially restricts their profits. That can affect us as investors.
The value of the USD has fluctuated dramatically over the decades.
The USD has been in a rising trend since the Great Financial Crisis in 2008 and especially since the European debt crisis in 2010.
The recent drop in the USD is just noise in the consistent upward trend.
However, the Trump administration has meddled so much in the economy (especially with tariffs) that the movers and shakers are wondering if this is the beginning of a monumental trend change – a long-term fall of the USD.
Dollar Doubts Dominate Gathering of Global Economic Leaders
Participants at the I.M.F and World Bank meetings this week reckoned with the prospect that the U.S. safe haven could lose its luster.
By Colby Smith, The New York Times, April 26, 2025
On the sidelines of the spring meetings of the International Monetary Fund and World Bank this week, Treasury Secretary Scott Bessent tried to convey an important message about the United States dollar.
Speaking to a crowd of global policymakers, regulators and investors, Mr. Bessent sought to allay fears that had ballooned in recent weeks about the dollar’s global standing and the country’s role as the safest haven during times of stress. He reiterated that the administration would continue to have a “strong-dollar policy” and affirmed that it would remain the currency that the rest of the world wanted to hold, even though it had weakened against most major currencies…
It is hard to overstate the dominance of the dollar globally, meaning there are real limitations to how significantly private and public investors can diversify away from it, even if they want to.
Most trade is invoiced in dollars. It is the leading currency for international borrowing. Central banks also prefer to hold dollar assets more than anything else, and by a wide margin…
China lacks open, deep and liquid capital markets, and its currency does not float freely, tarnishing its appeal globally. … the amount of available euro-denominated safe assets pales in comparison with that of U.S. capital markets… [end quote]
Amid all the chaotic shifts of the administration throwing the markets into a tizzy, at least they are firm about maintaining the strength of the USD and its status as the world’s reserve currency.
A chaotic rush out of the USD as the world’s reserve currency could potentially cause an international financial crisis due to limited liquidity. It’s one thing for gold to soar to record heights but nobody settles accounts in gold. If the USD falls below its long-term trend – if a true trend change occurs – it could indicate loss of USD reserve status.
Wendy