Key Takeaways

  • Political responses to the coronavirus outbreak have exposed just how deeply-rooted today’s “Dollar Standard” is and the potential consequences of such a dominant world reserve currency. The direction the dollar trades can have significant influence far beyond the borders of the United States.

 

  • The US dollar sits at the heart of nearly every major macro trend right now. The great in(de)flation debate, commodity prices, global growth, world exports & trade, the rebound in risk assets; the future of all these trades is, at least in part, tethered to the direction of the US dollar.

 

  • A weaker dollar would alleviate pressure on foreign markets, notably emerging market countries and corporates with material amounts of dollar-denominated debt obligations. Further declines in the buck may also provide relief for certain emerging economies via higher commodity prices, sparking greater pricing pressure and a potential reflation trade.

 

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