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00:01 Speaker A
All right, let’s talk about the dollar. It’s fallen about 9% in the last year as investors risk hedging strategies shift away from the US. Yahoo Finance’s Jake Conlee joins me now with more on what the market is showing. Two buzz words that we’ve been hearing more about, de-dollarization and the debasement trade are like the two things that people are talking about. So how is this all happening in the market?
00:30 Speaker B
Right. You go back to last April, Trump’s liberation day announcement with all those tariffs that came into play. The dollar dropped several percent right after that has remained depressed and kind of flat lining over the past year. still down 9% from the past year. So it’s a sizable drop. While that’s been happening, you’ve seen a lot of other currencies picking up in its place. Not only the strong ones like the Swiss Frank or the Euro, but also some of these more risk on emerging markets currencies. South African Rand, Brazilian Real, Mexican Peso are all doing really well against the dollar.
01:13 Speaker B
Is it debasement? It’s probably too early to call it that. analyst Bank of America have been saying that if it was going to be a full debasement trade, you’d see everything in the US doing poorly. The dollar would be down, also the stock market would be down. You’d see risk in the credit markets. With the exception of the last couple of days with the software sell off, stock markets are actually doing pretty well right now. The credit market in the US is not showing too much stress. So it’s probably too early to call it debasement, but it’s certainly early enough to say that investors are starting to think about risk differently.
01:46 Speaker A
And and what the difference is, just for people who are watching, at least in my mind, is, um, if the dollar is the world’s reserve currency. That’s the word that people use a lot when they’re describing the US dollar. Um, it would be a more fundamental shift away from that that would indicate debasement, right? If if global central banks which yes have been adding to their gold positions, but if they had been getting rid of dollar assets in a more dramatic fashion, to your point, across the board, that would be a signal more of a broad-based debasement trade.
02:22 Speaker B
Exactly. You’d see some of those really broad movements out of the central banks globally. But I think the difference here, Julie, is where the risk is coming from. Years past, risk emanated from outside of the US and the US was able to act as a stabilizer. It was kind of this global safety haven. The dollar was seen as a safe haven asset. In the last year or two, you’ve seen that picture change for investors. More and more geopolitical risk is coming from inside the US. You see the tariff threats, Trump’s moves on Greenland, on Venezuela. All of that is now saying to investors
03:03 Speaker B
what used to be a safe haven is now where a lot of this risk is coming from. Right.
03:09 Speaker B
And now that you have Kevin Warsh being nominated for the Fed chair, if the Fed were to start cutting rates as Trump has asked for, it’s not clear if they’re going to, that’s a group decision, but if they were to, that’s going to bring down the yield and bring down some of that premium that investors would usually get from a dollar and usually expect from it.
03:26 Speaker A
Right. The call is coming from inside the house.
03:28 Speaker B
Exactly.
03:28 Speaker A
Thanks, Jake, appreciate it.
03:30 Speaker B
Thanks, Julie.