美元主导与美元贬值-行进在不同轨道-Global Markets Analyst_ Dollar Dominance and Dollar Depreciation — Moving on Different Tracks (Trivedi_Jenkins)

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the Dollar's dominance and depreciation within the context of the international financial system, analyzing its current status and future outlook. Core Insights and Arguments 1. Dollar's Future: The Dollar is unlikely to be replaced soon, but it is expected to depreciate due to the US economy's less exceptional performance, making it harder to attract unhedged capital flows [3][4][5] 2. De-dollarization Evidence: There is limited evidence of de-dollarization despite a decline in the Dollar's share of central bank reserves by approximately 8 percentage points since 2015. The Dollar remains dominant in global debt issuance, cross-border transactions, and spot FX trading volumes [10][12][16] 3. Structural Factors: The US's share of global debt, GDP, and trade are more significant for the Dollar's internationalization than short-term financial swings. The gradual erosion of Dollar dominance is anticipated, but displacement appears distant [3][32][41] 4. TINA Factor: Attempts to diversify away from Dollar dominance are hindered by the unmatched scale, liquidity, and network effects of the Dollar. Alternatives like the Euro and Renminbi face significant challenges [4][58][61] 5. Forward-Looking Dollar View: The Dollar is expected to depreciate further due to less exceptional economic performance and a high valuation that needs correction. The Euro and Yuan are projected to strengthen due to favorable economic conditions in Europe and China [65][69][70] Additional Important Considerations 1. Impact of US Policies: The US's evolving trade and security policies may impact its share of global trade, which could have significant implications for Dollar internationalization. A 5 percentage point reduction in the US's share of global trade could lead to a ~2.5 percentage point decrease in the Dollar's global usage [42][45] 2. Historical Context: Historical patterns indicate that shifts in currency dominance can be slow and complex, often influenced by geopolitical factors and institutional considerations. The UK’s experience with Sterling illustrates this inertia [45][53] 3. Stablecoins and Dollar Dominance: The rise of Dollar-pegged stablecoins reinforces the Dollar's global standing, as the majority of circulating stablecoins are Dollar-based [54][60] 4. Gradual Changes: The report emphasizes that any erosion of Dollar dominance is likely to be a multi-decade process, while further Dollar depreciation is expected in the near term [71][74] This summary encapsulates the key points discussed in the conference call regarding the Dollar's current status and future outlook in the global financial system.