How will the US dollar perform in the future?

Evidence(4)

1. 

   ESR, Jul 2025--Chapter 2 - International Monetary System: Currencies in a Changing World

   [1]

   Date unavailable

   The IMF chapter finds the international monetary system centered on the dollar, whose trade, finance, reserve, and payment roles exceed US economic weight. Network effects, complementary uses, deep markets, and Treasury safety support persistence. Geopolitical fragmentation, rising renminbi use, weaker US intermediation, and digital payments could gradually reshape currency use.

   1

   This supports a base case of continued dollar leadership rather than a near-term replacement. It does not forecast the dollar’s exchange rate. For future performance, the key watchpoints are network fragmentation, fiscal capacity to supply safe assets, Chinese capital controls, and whether alternative payment rails build comparable liquidity. The chapter says gradual reconfiguration remains possible, but no alternative currently matches US market depth.

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2. 

   Eye on the Market

   [2]

   Date unavailable

   J.P. Morgan Asset Management reports a resilient dollar: 88%–89% of FX turnover, 57% of official reserves, 51% of SWIFT payments, 51% of cross-border loans, and 42% of export invoicing. Foreign holdings of US assets keep rising, while China’s capital controls and limited market depth substantially constrain the renminbi’s reserve-currency prospects.

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3. 

   The Fed - The International Role of the U.S. Dollar – 2025 Edition

   [3]

   Date unavailable

   The Federal Reserve staff’s index shows little change in dollar use over five years and a 65–70 level since 2010, far ahead of other currencies. In 2024, the dollar held 58% of disclosed reserves, about 50% of SWIFT payments, 55% of international banking claims, and 88% of FX transactions globally.

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4. 

   www.nber.org

   [4]

   Date unavailable

   The working paper documents declining Treasury convenience yields since 2022 and foreign ownership of US public debt falling from roughly 45% to 30%. Its calibrated full-loss scenario removes reserve demand, producing an 8.8% real dollar depreciation, 90-basis-point higher US real rates, and a wealth loss near one year of GDP.

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