Dollar decline: Is the US dollar about to be replaced?

The United States dollar has declined steadily in the past three months, alongside a selldown in US technology stocks, suggesting investors may be rethinking their allocation to US assets.

“You would expect the dollar to appreciate when things become riskier, but that hasn’t been the case lately,” Aurora Macro Strategies chief economist Dimitris Valatsas told Markets with Madison from New York.

“I think that’s baffling to quite a few people who trade in the asset class.

“It’s related to what we’re seeing, the dollar’s role in the global financial system and how that’s being challenged by the new trade policy here.”

Valatsas suggested the Trump administration could be devaluing the country’s currency intentionally through tariff trade policies.

“[The administration] would like to lower the United States’ trade deficit with the rest of the world, and a lower dollar could lead to US products being more competitive, and then therefore boost US exports.”

But it had put the greenback’s prime position as the world’s reserve currency at risk.

“There has been a steady, small but steady, decline out of US dollar reserves toward alternative currencies, and I think we should expect that to continue as the US’ role in global trade diminishes.”

What other currencies will the world transact in instead, and what impact does a declining dollar have on the US fiscal deficit and investor portfolios?

Watch today’s episode of Markets with Madison above to find out.

Get investment insights from executives and experts on Markets with Madison every Monday and Friday here on the NZ Herald, on YouTube and wherever you get your podcasts.

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Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.

Madison Malone (nee Reidy) is host and executive producer of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.