A recent report by a prominent Indian financial entity, Union Bank, has delivered a stark reality check about the declining US dollar. The report stated how the US dollar is currently plummeting as the rising trend of shifting capital from US assets continues to gain pace. This development has led the investors to pivot their interests towards alternative assets, making the dollar more volatile than ever. This trend is also signaling the rising de-dollarization shift, showcasing the global trust and faith declining in the American currency.

Also Read: De-Dollarization Accelerates As US Dollar Becomes ‘Toxic’, Expert Warns

Capital Is Moving Away From US Assets: What It Means

us dollar burning
Source: Watcher.Guru

A new report by the Union Bank has brought forth a new compelling hypothesis, undermining reasons for the US dollar’s fall. The bank stated that the US dollar’s plunging value status can primarily be attributed to the global capital outflows, which have now started to take a toll on the US dollar.

“The dollar’s weakness is no longer being driven solely by shifting rate expectations; it is now being reinforced by a decisive reallocation of global capital.” The report shared

The report further stressed the US Federal Reserve’s stance on policymaking as interest rate cuts, as a crucial way to alleviate some pressure on the dollar.

The Federal Reserve has lately been adopting a cautious stance, with dovish comments. The report further shared how keeping interest rates steady can ultimately take a toll on the USD’s global stature.

However, a greater emphasis was given to the dollar’s decline, driven primarily by the shifting of global sentiment. Interest in US assets seems to be declining, spurred by a variety of external factors, including Trump’s policies on trade and war. The report reiterated a similar sentiment, adding how the de-dollarization wave is crashing hard on the dollar, weighing it down a notch in recent times.

Dumping of US Assets on the Rise

Mirroring the facts in the report, several nations, including China, have reportedly been diversifying away from the US dollar. This move is indicative of a buildable de-dollarization wave. The one that is capable of derailing the US dollar in the long run.

Speaking statistically, the share of US Treasury holdings in total Chinese FX reserves has fallen dramatically by 15% since 2016.

“China is diversifying its currency reserves out of the US dollar. The share of US Treasury holdings in total Chinese FX reserves has declined by ~15 percentage points since 2016. To ~22%, near the lowest in at least 15 years. Over the same period, gold’s share has risen ~5 percentage points, to a record 6.8%. This trend accelerated in 2022, and since then, gold’s share of Chinese reserves has doubled. Over this time, China has acquired ~200 tons of gold. Gold is more desired than ever.”

Also Read: BRICS De-Dollarization Agenda is Exaggerated

  • De-dollarization
  • Fed
  • Federal reserve
  • US DOLLAR
  • USD