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How the U.S. is daring the world to find alternative to the dollar

Source: The Hindu

Dollor dominance at risk

Is the Dollar's Dominance at Risk?


The US Undermines its Own Currency

  • Attacks on the legal system following Trump's conviction raise concerns about US institutions.

  • Increased use of sanctions as a foreign policy tool worries some investors.

  • Rising national debt adds to anxieties about US financial stability.


No Clear Alternative Emerges

  • Despite frustrations with US actions, other currencies lack appeal due to:

  • Authoritarianism and instability in other countries.

  • Need for liquidity during geopolitical tensions.

  • Depth and maturity of US financial markets.

The Dollar's Underlying Strength

  • The US economy, strong institutions, and rule of law have historically supported the dollar.

  • Even with concerns, the dollar remains the world's reserve currency.

  • Recent surveys show central banks plan to increase dollar holdings.

Testing the Limits

  • Key questions remain about US commitment to:

  • Independent judiciary (e.g., ByteDance vs. TikTok case: This case specifically tests how the US balances national security concerns with due process and a fair legal system for foreign companies).

  • Strong institutions and the rule of law.

The Future of the Dollar

  • The US may be eroding trust, but other options are currently worse.

  • The dollar's dominance may face challenges, but its complete dethronement seems unlikely in the near future.

Additional Notes:

  • The outcome of the ByteDance vs. TikTok case could be a tipping point for some investors, especially in Asia, if the US government fails to provide clear evidence to support national security claims.

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