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Home / Business / The dollar has weakened. This is why it actually encapsulates its role as a reserve currency in the world

The dollar has weakened. This is why it actually encapsulates its role as a reserve currency in the world



It does not make much sense for the dollar to be used as widely as it is. Of course, the US economy is the largest in the world, but the dollar is on one side of 88% of all currency trading, despite the US accounting for about a quarter of global gross domestic product. Countries, particularly China and Russia, are also upset that the US is able to exercise its currency dominance to sanction government officials around the world.

But while the dollar has fallen 8.5% from its March high, according to the WSJ dollar index

BUXX

,
there is still no clear path or even idea of ​​how to replace the role of the dollar in the global financial system. It was only a year ago that former Bank of England Governor Mark Carney suggested that Facebook̵

7;s cryptocurrency could be a replacement, an idea that now sounds dizzying given the project battles, even as it turned out Carney’s critique of dollar hegemony when there was a dollar shortage during the onset of the coronavirus pandemic.

Brad Setser, senior fellow at the Council on Foreign Relations, says another point.

“A weaker dollar tends to lead to more interference from countries seeking to protect their exports in the foreign exchange market, and thus the accumulation of more reserves,” he says in a blog post this week. “Thus, a weaker dollar results in a higher rather than lower demand for dollars from the world’s reserve managers.”

And how do these reserve managers accumulate dollars? Buying U.S. Treasury, which comes to the rescue as the U.S. is releasing debt at a rapid pace as the latest budget deficit numbers released on Wednesday reinforce.

Setser says a number of countries returned to the market in June and July, actively working to devalue their currency – particularly Thailand, Taiwan, Singapore and India.

“Many export-oriented economies with large external surpluses are willing to let their currency fall against the dollar, but they remain willing to allow their currency to appreciate against the dollar when the wave returns. And so, “Most of the accumulation of dollar reserves in the world tends to come when the market is adding the dollar not up,” he writes.

hum

Initial unemployment claims fell sharply last week, with state claims reaching 963,000, a drop of 228,000. This is the first time during the pandemic that claims have been under 1 million.

Network equipment and software manufacturers Cisco Systems

CSCO

reported a decline in revenue and soft earnings guidance for the current quarter, and announced its chief financial officer would retire.

Conglomerate 3M

MMM

said sales trends improved in July, and the luxury goods maker

TPR

reported a narrower-than-expected loss.

apples

AAPL

is preparing a series of packages that will allow customers to subscribe to some of the company’s digital services at a lower monthly price, according to a Bloomberg News report.

The United States has said tariffs on European Union products will remain unchanged, despite efforts by aircraft manufacturer Airbus to comply with a World Trade Organization decision on state aid. Also on the trade front, a number of U.S. companies have lobbied the White House over the decision to ban the WeChat social media app, according to The Wall Street Journal.

markets

S&P 500

SPX

is within the touching distance of a record high, and US stock futures

ES00

YM00

NQ00

turned above.

10-year Treasury yield

TMUBMUSD10Y

increased to 0.69%.

Graph

Bank of America took a survey of European credit investors on what worries them. Investors of the investment rate are more concerned about the debt that brings negative and the growing Nasdaq

COMP

,
while highly productive investors worry more about the relentless rise of the Nasdaq than anything else. Current estimates of the depression of European banks’ stocks

SX7E

came in third place for both groups of investors. The August poll, according to Bank of America, also shows that credit investors have gone “all in”, pushing overloads to a record high with a net overweight of 62%. Not only is what investors call financial pressure (central bank action) very difficult to combat, supply is set to fall as companies have released debts earlier this year.

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Wind and solar energy accounted for a record percentage of electricity in the first half of 2020.

Prince Harry and Meghan, Duchess of Sussex, are now homeowners in California.

The observatory featured in the James Bond film “Goldeneye” had to be temporarily closed.

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