Latest news with #de-dollarization
Reuters
7 hours ago
- Business
- Reuters
Rising government debt poses greatest risk to US market standing, says BlackRock
NEW YORK, June 30 (Reuters) - Surging U.S. government debt may sap investor appetite for key U.S. assets like long-dated Treasuries and the dollar, bolstering the case for turning to opportunities beyond U.S. borders, BlackRock said on Monday. President Donald Trump's tariffs spurred market volatility this year and raised doubts over the dollar's status as the world's reserve currency. Fears of de-dollarization remain far-fetched but rising government debt could increase that risk, said fixed income executives at the world's largest asset manager. "We've been highlighting the precarious position of the U.S. government's indebtedness for some time now, and, if left unchecked, we view debt as the single greatest risk to the 'special status' of the U.S. in financial markets," they said in a third-quarter fixed income outlook note. Congress is debating a tax and spending bill that is a key element of Trump's economic agenda and that non-partisan analysts say will add up to $5 trillion over the next decade to the U.S. federal government debt pile of more than $36 trillion. Higher government debt could reduce the correlation between the direction of long-dated Treasury yields and monetary policy in the United States, BlackRock said, with yields rising despite the Federal Reserve cutting interest rates. Increased supply of U.S. government debt is likely to be met with lower demand from the Fed as well as foreign central banks. That argues for diversification outside of the U.S. government bond market and for more exposure to short-dated U.S. Treasuries that could benefit from interest rate cuts, the asset manager said. "Despite proposed spending cuts, deficits are still climbing - and more of that spending is now going toward interest payments," said BlackRock's investment managers. "With foreign investors stepping back and the government issuing more than half a trillion dollars of debt weekly, the risk of private markets being unable to absorb this debt and consequently pushing government borrowing costs higher, is tangible," they added.
Forbes
5 days ago
- Business
- Forbes
Serious Dollar Collapse Fear Drives Huge $5 Trillion 2030 Bitcoin Price Prediction To Rival Nvidia And Microsoft
Bitcoin and crypto have rocketed higher over the last year, surging along with stock markets despite fears of a 'Doomsday' scenario for the markets and the bitcoin price. Front-run Donald Trump, the White House and Wall Street by subscribing now to Forbes' CryptoAsset & Blockchain Advisor where you can "uncover blockchain blockbusters poised for 1,000% plus gains!" The bitcoin price has soared back toward its all-time high of $112,000 per bitcoin, up around 50% from its April lows and helped by U.S. president Donald Trump surprising traders with a 'massive' crypto prediction. Now, as the crypto market braces for a Congress game-changer predicted to 'unleash' trillions, a legendary billionaire has said he expects global 'de-dollarization" to catapult the bitcoin price to a $5 trillion market capitalization by 2030—putting it alongside technology giants Nvidia and Microsoft. Sign up now for the free CryptoCodex—A daily five-minute newsletter for traders, investors and the crypto-curious that will get you up to date and keep you ahead of the bitcoin and crypto market bull run The "de-dollarisation of the world [and] the end of U.S. exceptionalism" has been named as the ... More driving force behind a huge $5 trillion bitcoin price prediction. Philippe Laffont, the billionaire founder of hedge fund Coatue Management, has added bitcoin to his Fantastic 40 list, a collection of investments he thinks will be the biggest winners over the next five years. Laffont's list, which features Microsoft, Nvidia, bitcoin, Amazon and Meta as the top five and doesn't include tech giants Apple or Google at all, can be seen in full here. "I wake up every day at three in the morning and I'm like, 'why am I such an idiot? What have I been waiting for, not being involved in it?' And it just goes up and up," Laffont told CNBC, adding that, 'sometimes you have to change your mind and you have to say, well, 'I made a mistake.'' According to Laffont, who claims he hasn't bought bitcoin yet, its price could more than double to give bitcoin a market capitalization of over $5 trillion by 2030, with Microsoft forecast to soar to $5.7 trillion and Nvidia to $5.6 trillion. "I always thought, bitcoin's amazing, but it's double or triple the volatility of the Nasdaq," Laffont said. "It seems its volatility as an asset class is coming down." Laffont pointed to the gold's $22 trillion market cap as justification for bitcoin's performance over the next few years, along with "the de-dollarisation of the world [and] the end of U.S. exceptionalism."
Zawya
5 days ago
- Business
- Zawya
US foreign investment slump - anomaly or warning?: McGeever
(The opinions expressed here are those of the author, a columnist for Reuters.) ORLANDO, Florida - Much of the 'de-dollarization' debate has focused on foreign exposure to U.S. securities like stocks and bonds. But investors shouldn't ignore foreign direct investment flows, the traditionally sticky capital that may also be sending out warning signals. Foreign direct investment (FDI) typically involves an overseas entity acquiring the assets of a company in another country or increasing its holdings, often via the purchase of machinery, plants or a controlling stake. FDI is therefore considered a longer-term investment compared to portfolio flows, which can be more volatile. U.S. President Donald Trump says he has attracted record foreign investment into the country. Indeed, the White House has a page on its website with a "non-comprehensive running list of new U.S.-based investments" since Trump's second term began. The running total is in the trillions of dollars and includes pledges from several foreign countries. Included are more than $4 trillion in U.S.-bound investments pledged by the United Arab Emirates, Qatar, Japan and Saudi Arabia. During Trump's trip to the Middle East last month, he said the U.S. is on track to receive $12-$13 trillion of investments from countries around the globe, which includes "projects mostly announced ... and some to be announced very shortly." These flows may emerge in full, in time. But official figures on Tuesday showed that FDI in the first quarter actually fell to $52.8 billion, the lowest total since the fourth quarter of 2022. That's well below the quarterly averages of the past 10 and 20 years. The Commerce Department figures also showed that the U.S. current account deficit widened to a record $450.2 billion in the quarter, or 6% of U.S. GDP, meaning FDI inflows barely covered 10% of that shortfall. Should the Trump administration be worried? TARIFF DISTORTIONS The short answer is probably not, at least not yet. FDI flows are typically far smaller than portfolio flows into equity and fixed income securities, so from the perspective of funding the current account deficit, the drop in FDI is not as pressing a concern. On the other hand, if foreign investors are also buying fewer U.S. securities, capital from elsewhere will be needed to fund that deficit. Additionally, America's balance of payments data in the first quarter was hugely distorted by domestic consumers and businesses front-running Trump's tariffs, loading up on imports before the duties kick in later this year. Trump's bet is that the deficit will shrink this year and beyond as his 'America First' policies spur more "onshoring" from domestic firms as they bring production back home and the weakening dollar helps U.S. manufacturing by making exports more competitive. The subsequent boom will attract investment from companies and governments overseas. In theory. However, these dynamics work both ways. For example, the European Union is by far the largest provider of U.S. FDI, accounting for 45% of the total in 2023, according to Citi. The combination of the continent's German-led fiscal splurge, U.S. tariffs and 'de-dollarization' concerns could easily crimp that flow, perhaps significantly. Another potential risk to U.S.-bound FDI is 'Section 899' - the possible tax of up to 20% on foreigners' U.S. income that could be part of Trump's budget plans. A Tax Foundation report in May found that Section 899 would "hit inbound investment from countries that make up more than 80 percent of the U.S. inbound FDI stock." Industry pushback may water down Section 899, but it remains a cloud on the U.S. investment horizon. The U.S. is the world's biggest recipient of FDI, with a 25% share of global volumes in 2023, up from around 15% before the pandemic, according to Citi. Its economy is the largest in the world, a thriving hub of innovation, pioneering technology, artificial intelligence and money-making potential. That will always attract FDI. Whether it attracts as much in this new environment remains to be seen. Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. ROI delivers thought-provoking, data-driven analysis. Markets are moving faster than ever. ROI can help you keep up. Follow ROI on LinkedIn and X.
Japan Times
5 days ago
- Business
- Japan Times
Under shadow of Trump warning, Africa pioneers non-dollar payment systems
Africa's push for local currency payment systems — once little more than an aspiration — is finally making concrete gains, bringing the promise of less costly trade to a continent long hobbled by resource-sapping dollar transactions. But efforts to move away from the dollar face strong opposition and the threat of retaliation from U.S. President Donald Trump, who is determined to preserve it as the dominant currency for global trade. The move by Africa to create payments systems that do not rely on the greenback mirrors a push by China to develop financial systems independent of Western institutions. Countries like Russia, which face economic sanctions, are also keen for an alternative to the dollar. But while that movement has gained a sense of urgency due to shifting trade patterns and geopolitical realignments following President Trump's return to the White House, African advocates for payment alternatives are making their case based on costs. "Our goal, contrary to what people might think, is not de-dollarization," said Mike Ogbalu, chief executive of the Pan-African Payments and Settlements System, which allows parties to transact directly in local currencies, bypassing the dollar. An illegal money changer shows Zimbabwean notes and U.S. Dollar notes along a street in Harare, Zimbabwe in 2024. | REUTERS "If you look at African economies, you'll find that they struggle with availability for third-party global currencies to settle transactions," he said. Africa's commercial banks typically rely on overseas counterparts, through so-called correspondent banking relationships, to facilitate settlements of international payments. That includes payments between African neighbours. That adds significantly to transaction costs that, along with other factors like poor transport infrastructure, have made trade in Africa 50% more expensive than the global average, according to the U.N. Trade and Development agency. It is also among the reasons so much of Africa's trade — 84%, according to a report by Mauritius-based MCB Group — is with external partners rather than between African nations. "The existing financial network that is largely dollar-based has essentially become less effective for Africa, and costlier," said Daniel McDowell, a professor at Syracuse University in New York specialising in international finance. Homegrown systems According to data compiled by PAPSS, under the existing system of correspondent banks, a $200 million trade between two parties in different African countries is estimated to cost 10% to 30% of the value of the deal. The shift to homegrown payments systems could cut the cost of that transaction to just 1%. Systems like PAPSS allow a business in one country, Zambia for example, to pay for goods from another like Kenya, with both buyer and seller receiving payment in their respective currencies rather than converting them into dollars to complete the transaction. Using currencies like the Nigerian naira, Ghanaian cedi or South Africa's rand for intra-Africa trade payments could save the continent $5 billion a year in hard currency, Ogbalu said. Launched in January 2022 with just 10 participating commercial banks, PAPSS is today operational in 15 countries including Zambia, Malawi, Kenya and Tunisia, and now has 150 commercial banks in its network. "We have also seen very significant growth in our transactions," Ogbalu said, without providing usage data. The International Finance Corporation, the World Bank's private sector lending arm, has, meanwhile, started issuing loans to African businesses in local currencies. It views the switch as imperative for their growth, relieving them from the currency risks of borrowing in dollars, said Ethiopis Tafara, IFC's vice-president for Africa. "If they are not generating hard currency, a hard-currency loan imposes a burden that makes it difficult for them to succeed," he said. Geopolitics and the Trump factor Africa's campaign to boost regional payments systems has found a platform at the Group of 20 major economies, with South Africa leading the charge as holder of the G20's rotating presidency. It held at least one session on boosting regional payments systems when South Africa hosted a meeting of G20 finance ministers and central bank governors. And South Africa wants it to follow up the talk with concrete actions. The next meeting of G20 finance officials is scheduled for mid-July. "Some of the most expensive corridors for cross-border payments are actually found on the African continent," Lesetja Kganyago, South Africa's central bank governor, said during a G20 meeting in Cape Town in February. Kenyan currency notes are pictured inside a cashier's booth in Nairobi in 2023. | REUTERS "For us to function as a continent, it's important that we start trading and settling in our own currencies." Talk of moving away from the dollar — either for trade or as a reserve currency — has drawn aggressive reactions from President Trump, however. After BRICS — a grouping of nations including Russia, China, India and Brazil along with Africans like South Africa, Egypt and Ethiopia — weighed reducing dollar dependence and creating a common currency, Trump responded with threats of 100% tariffs. "There is no chance that BRICS will replace the U.S$. in International Trade, or anywhere else, and any Country that tries should say hello to Tariffs, and goodbye to America!," he wrote on Truth Social in January. In the months since, Trump has demonstrated his willingness to use tariffs to pressure and punish allies and foes alike, a strategy that has upended global trade and geopolitics. No matter its intentions in moving to more local currency transactions, Syracuse University's McDowell said Africa will struggle to distance itself from more politically motivated de-dollarization efforts, like those led by China and Russia. "The perception is likely to be that this is about geopolitics," he said.
Zawya
18-06-2025
- Business
- Zawya
Foreign central banks are shrinking U.S. asset exposure: McGeever
(The opinions expressed here are those of the author, a columnist for Reuters.) ORLANDO, Florida - As debate rages around 'de-dollarization' and the world's appetite for dollar-denominated assets, one major cohort of overseas investors appears to be quietly backing away from U.S. securities: central banks. That's the conclusion to be drawn from the New York Fed's latest 'custody' data, which shows a steady decline in the value of Treasuries and other U.S. securities held on behalf of foreign central banks. There are many ways to gauge foreign demand for U.S. assets, and they often send conflicting signals. Moreover, the broadest and most accurate measures, like U.S. Treasury International Capital (TIC) or the International Monetary Fund's 'Cofer' FX reserves data, come with a long lag of two months or more. The New York Fed custody holdings figures are weekly, which is as 'real time' as it gets in the world of central bank flows. These figures last week showed that the value of U.S. Treasuries held at the New York Fed on behalf of foreign central banks fell to $2.88 trillion. That's the lowest since January, and the $17.1 billion decline was also the biggest fall since January. Including mortgage-backed bonds, agency debt and other securities, the total value of foreign central banks' U.S. custody holdings at the New York Fed last week dropped to $3.22 trillion, the lowest since 2017. That figure has fallen by around $90 billion since March, just before President Trump's 'Liberation Day' tariff debacle on April 2, with more than half of the decline coming from Treasuries. If these moves are representative of broader trends, then FX reserve managers are reducing their exposure to U.S. bonds, as a share of their overall holdings and in nominal terms too. MURKY PICTURE It's not easy to get a firm handle on the exact composition of central banks' dollar-denominated assets, which are worth trillions and are spread across multiple sectors, jurisdictions and continents. This is why different cuts of central bank data can tell different stories. For example, the latest TIC data show that foreign holdings of U.S. Treasuries rose to a record $9.05 trillion in March, with official sector holdings increasing as well. The official sector held nearly $4 trillion of bills and bonds, around 45% of all foreign exposure. But these figures are nearly three months out of date, and foreign demand for Treasuries in recent months – in the secondary market and, more recently, at auction – has been driven by private sector institutions, not the official sector. There are large pools of 'hidden' FX reserves too potentially worth trillions of dollars, held in offshore accounts, overseen by quasi-official entities like sovereign wealth funds or, in the case of China, state banks. Meghan Swiber, director of U.S. rates strategy at Bank of America, says the fall in custody holdings is a warning sign, especially as it has been accompanied by a modest decline in foreigners' usage of the Fed's overnight reverse repo (RRP) facility. When Treasuries mature, foreign central banks will often park the cash at the RRP. But they haven't been doing that lately, Swiber says, meaning both their Treasury holdings and overnight cash balances at the Fed are falling. "We worry about foreign demand going forward," Swiber wrote on Monday, also pointing out that it's "unusual" for reserve managers to reduce their U.S. Treasury holdings when the dollar is weakening. "This flow likely reflects official sector diversification away from dollar holdings." The $28.5 trillion Treasury market is deep and liquid, and central banks remain significant participants in it. They are cautious and careful by nature, meaning any changes to their holdings will be gradual. But the weekly custody data suggest some central banks may already be getting that ball rolling. (The opinions expressed here are those of the author, a columnist for Reuters) Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. ROI delivers thought-provoking, data-driven analysis. Markets are moving faster than ever. ROI can help you keep up. Follow ROI on LinkedIn and X. (By Jamie McGeever; Editing by Jan Harvey)
