Investing.com – The US dollar has had a rough summer, dropping significantly in August, but JPMorgan thinks those predicting the US currency’s demise are getting ahead of themselves.
At 06:00 ET (10:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.2% lower at 101.127, having lost 1.6 over the past month. % had lost.
“Diversification beyond the dollar is a growing trend,” JPMorgan analysts said in a September 4 note, “but we find that the factors supporting dollar dominance remain well entrenched and structural in nature.”
The role of the dollar in global finance and its implications for economic and financial stability are supported by deep and liquid capital markets, the rule of law and predictable legal systems, the pursuit of a free-floating regime and the smooth functioning of the financial system for the liquidity of the dollar and institutional investors. transparency, the bank added.
Furthermore, the private sector’s genuine confidence in the dollar as a store of value appears unquestioned, and the dollar remains the most widely used currency across several measures.
That said, “we are witnessing greater diversification and significant shifts in cross-border transactions as a result of sanctions against Russia, China’s efforts to boost the use of the RMB, and geoeconomic fragmentation,” JPMorgan said.
The most important and underappreciated risk, the bank added, is the increased focus on payment autonomy and the desire to develop alternative financial systems and payment mechanisms that do not depend on the US dollar.
“The risks of de-dollarization seem exaggerated, but cross-border flows are transforming dramatically within trading blocs and commodity markets, along with an emergence of alternative financial architecture for global payments,” JPMorgan said.
