JPMorgan: US Dollar's Decline Overstated, Dollar Dominance Remains Strong
In a note dated Sept. 4, analysts at JPMorgan emphasized that despite the US dollar's significant drop during August, predictions of its demise are premature. The Dollar Index, which measures the greenback against a basket of currencies, has decreased by 1.6% over the last month, trading 0.2% lower at 101.127.
JPMorgan highlighted the factors that support the dollar's dominance, such as deep and liquid capital markets, rule of law, and predictable legal systems. The bank noted that the private sector's confidence in the dollar as a store of value is unwavering, making it the most widely used currency globally.
However, the bank acknowledged the growing trend of diversification away from the dollar, driven by factors like sanctions against Russia and China's efforts to boost the usage of the RMB. JPMorgan warned that the real risk lies in the desire to develop alternative financial systems and payment mechanisms that do not rely on the US dollar.
In conclusion, while concerns about de-dollarization may be exaggerated, the landscape of cross-border transactions is evolving rapidly. Investors should pay attention to these shifts and consider the implications for their portfolios.
