Dollar Reserves
With the passing of Trump’s original deadline for the reimposition of liberation day tariffs yesterday, markets have breathed a sigh of relief. July VIX futures continued to slide lower. Moreover, what may surprise anyone who had been expecting the issue of tariffs to resurface following the passing of Trump’s new deadline, so too did the August futures contract. Despite implied volatility amongst US equities falling, the Dollar continued to secure a bid, closing the European session stronger against the Euro and Pound.
IMF data released yesterday showed an unflattering image for the US Dollar in its share of global reserves. Whilst the Euro and Swiss Franc advanced in their share of reserves to new record highs, the Dollar’s continued to decline. We can also look at claims data to qualify any de-dollarisation theories that have become more widespread since the Dollar’s 2025 sell-off. Claims data represents the registered interests or ‘claims’ of financial institutions abroad and are disclosed in a number of currencies. The Dollar’s share of such claims remains the largest and three times that of the Euro.
That said, even amongst claims data, the growth of non-USD interest registered is growing much faster. This is consistent with the theory that any reversal of the Dollar’s hegemony will be slow. Trump made some surprising comments earlier this week when he discussed (in different language) the Dollar’s reserve status. Trump in retaliation to the BRICs group of nations defended the United States’ interest in keeping its currency as the international business standard. Trump is a President that many had supposed would like to see a weaker dollar. However, we must assume that POTUS will know that maintaining global reserve status is not consistent with dramatic devaluations in the currency.
Discussion and Analysis by Charles Porter
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