Source: The Hindu
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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