FameEX Hot Topics | UBS Anticipates Prolonged US Dollar Dominance in the Years Ahead

UBS, the Swiss investment banking giant, has firmly asserted its belief in the sustained dominance of the U.S. dollar well into the foreseeable future. Alejo Czerwonko, Managing Director and Chief Investment Officer Emerging Markets Americas at UBS Global Wealth Management, recently emphasized the continued centrality of the U.S. dollar within the global financial landscape despite a recent Fitch Ratings downgrade.

Czerwonko's affirmation rests on a triad of fundamental pillars. Firstly, he underscores the "stickiness" inherent in global currency regimes. Highlighting the U.S. dollar's historical grip on financial markets and international trade, he stresses that shifts in the hierarchy of dominant currencies tend to unfold gradually. Even as a nation's influence wanes, the endurance of its currency's reserve status is a consistent historical trend.

Secondly, Czerwonko hails liquidity as a pivotal factor underpinning the U.S. dollar's continued preeminence. He positions liquidity as a vital quality sought by global reserve managers and entities engaged in cross-border transactions. In this domain, the U.S. dollar still reigns supreme, reflecting its unmatched utility and reliability for international financial operations.

The third rationale that bolsters UBS's outlook is stability and safety. Despite ongoing challenges faced by the U.S. financial and political systems, Czerwonko highlights the nation's commendable rankings in critical facets such as rule of law, regulatory quality, efficiency, and market openness. The U.S.'s strong performance in these assessments contributes to its image as a secure and stable hub for financial activity.

Czerwonko concludes by asserting the probable continuance of the dollar's prominence, though he allows for the emergence of competing currencies over time. He recognizes that geopolitical tensions could potentially accelerate shifts in the global currency hierarchy, but he stresses that no single currency seems poised to disproportionately gain from such shifts.

UBS's stance reflects a cautiously optimistic perspective on the U.S. dollar's ongoing influence within a backdrop of evolving economic and geopolitical dynamics. The confluence of historical inertia, unwavering liquidity primacy, and stability factors combine to underpin this viewpoint. In UBS's assessment, the U.S. dollar is poised to remain a pivotal global currency while also accommodating the emergence of competitive contenders on the world stage.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.