Intro LO:
In my view, the US$ decline was due for decades but the new US president caused its tipping point, “a point in time when a group—or many group members—rapidly and dramatically changes its behavior by widely adopting a previously rare practice.” (Wiki).
Finally, we are willing to see a country busy with tax cuts for the rich while ballooning its already immense deficit by adding “at least $3.3 trillion to Debt“. If rich Americans are not willing to pay taxes, why would that country be willing to repay its debts??
Slowly, hedging American risk is becoming a need rather than a want or a belief.
For a different view, please see the latest version of FT’s newsletter Unhedged (sic!):
- Financial Times, Unhedged by Robert Armstrong, 1 July 2025: The fall in the dollar is not scary
or this article in the New York Times (NYT):
- NYT, 1 July 2025: The Dollar Has Its Worst Start to a Year Since 1973
or this Foreign Policy essay:
- FP, 30 June 2025: How Low Can the Dollar Go?
Axios Markets: The big America hedge
By: Emily Peck
Date: 27 June 2025
“Some Wall Street veterans say appetite for the U.S. dollar is waning in ways not seen in years.
Why it matters: It could be the great unwind of the greenback binge of the past decade, when exposure to America was the world’s safest — and a highly rewarding — investment. Now investors are hedging those bets.
What they’re saying: “We’re in a new era, where global investors no longer reflexively buy dollars or treasuries at the first sign of trouble,” Jason Thomas, head of global research and investment strategy at Carlyle, tells Axios.
- Themos Fiotakis, a currency strategist at Barclays, puts it this way: “Since April, there’s this trend that investors are trying to reduce the amount of dollar exposure. Some of that is a little bit of normalization, but there is a sense they need to go even deeper.”
By the numbers: The U.S. dollar index is down more than 10% against a basket of other currencies this year, hitting a three-year low. The speed of the decline is the story.
- The dollar index peaked when President Trump was inaugurated. But it has since “fallen farther, faster than in any year since the U.S. abandoned fixed exchange rates,” Karl Schamotta, a currency strategist at payments firm Corpay, tells Axios.
The intrigue: The drop is among the hints of some “America-proofing” underway.
- Bearishness on the U.S. dollar hit a 20-year high among global fund managers in May, according to Bank of America.
The big picture: Among investor turn-offs are Trump’s volatile trade policy, stagflation fears, and exploding deficits.
- New on the list is a Wall Street Journal report that Trump may announce a new Federal Reserve chair this summer, well before Jerome Powell’s term ends next year.
- If the pick is willing to push rates lower at Trump’s whim, it would almost certainly strip America of its reputation as the global anchor of stability.
Threat level: The global economy runs on the U.S. dollar, but the chaos and uncertainty is reviving questions about how long (or whether) the reign will continue.
- “I have been getting a lot of inbound from clients about the euro as an alternative,” Fiotakis says. While there is plenty of “anti-dollar” sentiment, no other currency has the might to replace it, he adds.
What to watch: Wall Street is still spooked by the “Liberation Day” aftermath, which showed investors flee U.S. assets, selling government bonds and dollars.
- “It is the sort of pattern you’d normally see in a stressed, emerging market,” Adam Slater with Oxford Economics tells Axios, not the world’s economic juggernaut.”
Sources:
- Axios Markets, 27 June 2025: The big America hedge
- Financial Times, 1 July 2025: Unhedged: The fall in the dollar is not scary
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