Dollar supremacy at risk, Flight to safety complicates low yields, and more

Dollar supremacy at risk: Empires rarely collapse overnight. Instead they tend to crumble slowly before a significant external shock applies the coup de grâce.

Historians will chart the decline of the dollar as the global financial system’s currency of choice for both payment and reserve asset. They may decide that the turning point was the week in 2020 which saw the US Congress debating how to send helicopter money paper cheques in the mail to its citizens, while China announced its wide-ranging beta test of a digital fiat currency, writes Philip Middleton.

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Video Dallas Fed’s balance: Central banks are looking at a wider batch of societal considerations beyond purely economic aspects. Robert Kaplan, president of the Federal Reserve Bank of Dallas, discusses the pandemic, educational research, trade and investment links with China, and the outlook for the dollar and US economy. Watch the recording. Commentary Flight to safety complicates low yields: Official institutions are conservative investors. Of the $19.5tn in assets managed by the 92 institutions part of this year’s Global Public Investor analysis, more than half is in government bonds. Still, allocation to the asset class has fallen for all three GPI types, writes Danae Kyriakopoulou. Read more.

Commentary China’s mysterious dollar dealings: There are two enigmas regarding China’s dollar business. The first is Chinese banks’ continued purchases of US treasuries. The second is why these banks are seeking to become a major intermediary for dollar financing to emerging market economies, writes Herbert Poenisch. Read more. Commentary US Treasury’s Vietnam problem: In a little noticed countervailing duty case involving Vietnamese tyres, the US Treasury may have set off tremors for the international monetary system, concluding for the first time that currency undervaluation potentially warrants a Commerce Department subsidy finding, writes Mark Sobel. Read More.