Chris Jeffery, head of macro strategy at Legal & General Investment Management (LGIM), posted this chart and discussion on LinkedIn on June 9. (See https://www.linkedin.com/in/chris-jeffery-44398728/.)
We are excerpting.
As shown in June’s chart of the month, the USD remains dominant in global reserves, liquidity and trade invoicing. It’s also no coincidence that US military spending is roughly comparable to the rest of the world combined. The dollar has been under pressure recently, with a 10% fall in the value of the US trade-weighted exchange rate since the start of the year. But that’s different from the end of the US dollar’s reserve currency status. The remaining AAA-rated countries may be more creditworthy than the United States but, with the exception of Germany, they are all small markets. When it comes to picking a global reserve currency, there is no alternative (TINA) to the US dollar.
In this series, Part 3, we showed a chart that illustrated the dollar weakening about 10% against a basket of other currencies. This weakness was coincident with the Trump administration 2.0 and the onset of Trump’s tariff’s policy.
The issue of the US dollar and its continuing role as the world’s dominant reserve currency is a consuming debate among market agents. Dollar detractors are arguing against the dollar in various ways. Central banks around the world are adding to their holdings of gold as a reserve currency. Note that no central bank is selling.
Will the dollar collapse? I doubt it. Will other currencies continue to try to become alternatives or substitutes for the dollar in payments? Yes. We already see it.
As Chris Jeffery’s chart shows, the dollar’s role still remains strong even after America lost its AAA rating. The reserve currency role of the ten AAA-rated countries combined is not as large as the reserve currency role of the US dollar even though the dollar has lost its AAA rating.
As an additional resource this morning, links to Cumberland Advisors’ Mid-Year Outlooks follow. The first is more general, and the second targets fixed income. There is some overlap. My outlook concludes the first document.
“2025 Cumberland Advisors Markets Mid-Year Outlook” | Cumberland Advisors,
https://www.cumber.com/market-commentary/2025-cumberland-advisors-markets-mid-year-outlook
“2025 Cumberland Advisors Fixed Income Markets Mid-Year Outlook” | Cumberland Advisors,
https://www.cumber.com/market-commentary/2025-cumberland-advisors-fixed-income-markets-mid-year-outlook
