By rae weekend
Singapore (Reuters) – In just one week, the dollar has gone from a refuge for the whip of investors as chaotic tariff of US President Donald Trump on the friend and the enemy undergoing decades of trust in the global reserve currency.
The sudden loss of confidence was nowhere more austere than on the treasury market, which saw the highest weekly increase in borrowing costs since 1982 while offshore funds have fled.
“The United States, almost overnight, he seems to have lost his safe attributes,” said Ray Attrill, head of the FX strategy at the National Australia Bank.
“There is … a loss of confidence to a certain extent … You overlap this with the loss of exceptionalism and the idea that in the short term, at least, it is the American economy that will suffer more than any other from what is happening on the price front.”
The dollar, already underway for its worst year since 2017, has plunged a decade against the Swiss franc on Friday and fell to its lowest level against the euro in more than three years.
“The entire premise of the dollar as reserve currency is disputed, in fact, by what we have seen since the election of Trump,” said Attrill.
It was the creation of the Bretton Woods system in 1944 which cemented the global position of the greenback. The post-war planners have designed a system built on the stability of exchange rates and the deepening of international trade and the dollar remained dominant even after the breakdown of Bretton Woods in the early 1970s.
But Trump’s recent movements on trade have shaken perceptions. In a few days, he imposed heavy prices in the world, turned around his decision and intensified a trade war with China, questioning the reliability of the American administration.
Global actions have lost billions of dollars and the world markets have come into a fall.
“Whatever the way the next 90 days are changing, the international reputation of the United States has been eroded,” said the chief economist of the Anz group, Richard Yetsenga, in a note.
“The global economy is in a lower position than before the prices.”
Martin Whetton, head of the financial market strategy in Westpac, said that the massive change of this week in swap differences in US dollars, the “Sharp Flash-Crash” was moving above in the American treasury yields and the high sale in the dollar has shown “the undressing of the liquidity and security shield”.
“By losing or reducing credibility as a financial refuge, the creditors’ desire to lend money to the United States is reduced,” he said.
