The American dollar sends alarming signals. More and more countries are avoiding investing in US debt. Is dollar hegemony coming to an end?
Over the past few years, the dollar has been supported by demand from foreign central banks, but now everything has changed. Even Japan, and that reduces the volume of treasuries in its reserves.
In February, Japanese investors sold a record volume of US debt – at $ 36.68 billion. Since last October, the Japanese sold treasuries at $ 71.72 billion. Apparently, they decided to shift to euros, since in February they bought such securities at 8.06 billion, and this is the fifth consecutive month when Japanese investors bought bonds in euros.
In addition, most recent auctions of US debt securities are held with extremely weak demand from non-residents, and this is an extremely serious signal.
Apparently, the global financial system is changing before our eyes.
At the same time, treasury yields continue to grow. Ten-year bonds are now traded with a yield of 2.96%, which is even higher than before the February stock market crash. So, US government bonds are getting cheaper, the dollar is not growing, and the cost of swaps is such that foreigners investing in treasury funds taking into account the hedge become unprofitable.
If the fall in the value of bonds continues, and yields, in turn, break above the 3% mark and then other important technical levels, then it is quite possible that we will see another wave of weakening dollar.
The likelihood of such a scenario is quite high, however, if you plunge into the theory of conspiracies, we can assume that this option is quite suitable for American elites, and all the problems can be attributed to Trump.
Otherwise, the situation in the United States is extremely unpleasant. The American president has carried out some reforms, but so far there is no tangible result, while the Fed continues to raise rates. At some point, the regulator may even begin to rapidly increase rates to support the dollar, but in such a situation, economic growth will be finally destroyed.
The situation itself is unique. Never before in history have fiscal and other incentives taken place against the backdrop of tightening monetary policy, that is, in fact, we see two opposite processes.
Against this background, the US economy is already experiencing certain problems, and in the light of recent events and the possible "trade war" with China, the prospects are only worsening.
It is also worth adding that the United States has embarked on a direct struggle against competitors, but this struggle is being conducted with the use of force, that is, sanctions, and this may not give the fruits that the Americans are counting on. The introduction of duties is one example of such a struggle. In other words, if an American manufacturer loses fair competition, then it just needs to create conditions under which there will be no place for competitors. But such an approach, as already mentioned above, is not entirely suitable for modern realities, and even the Allies may not like it.