FameEX Hot Topics | UBS Foresees Continuation of US Dollar Dominance for 'Years Ahead'

Swiss investment banking giant UBS has expressed its conviction that the U.S. dollar's dominance will persist into the foreseeable future. Despite the recent Fitch Ratings' downgrade, Alejo Czerwonko, Managing Director and Chief Investment Officer Emerging Markets Americas at UBS Global Wealth Management, emphasized the continued centrality of the U.S. dollar in the global financial landscape.

Czerwonko presented three key reasons to support UBS's stance. Firstly, he highlighted the inherent stickiness of global currency regimes. Drawing attention to the U.S. dollar's control over financial markets and international trade, he noted that shifts in dominant currencies historically evolve gradually. The resilience of a currency's reserve status often endures even after the zenith of a nation's influence wanes.

Liquidity emerged as the second compelling factor in Czerwonko's argument. He positioned liquidity as a pivotal attribute sought by global reserve managers and entities engaged in international trade. Emphasizing the enduring dominance of the U.S. dollar in this regard, he underscored its status as the world's foremost currency for these purposes. Stability and safety constituted the third rationale behind UBS's outlook. Czerwonko highlighted the U.S.'s impressive rankings in key aspects such as rule of law, regulatory quality, efficiency, and market openness. Despite ongoing challenges within the U.S. financial and political systems, the country's robust performance in these evaluations underpins its attractiveness as a stable and secure hub.
In conclusion, the UBS executive asserted the likelihood of the dollar's continued dominance, tempered by the potential emergence of competing currencies over time. Czerwonko acknowledged the possibility of geopolitical tensions sparking swifter shifts in the global currency hierarchy. Nevertheless, he noted that there isn't a single currency poised to disproportionately benefit from such shifts.

As the world navigates through evolving economic and geopolitical landscapes, UBS's stance reflects a cautious yet optimistic view of the U.S. dollar's enduring influence. The confluence of historical inertia, liquidity dominance, and stability factors form the foundation of this perspective, signaling UBS's expectation of the U.S. dollar's continued prominence while allowing for the emergence of viable contenders in the global currency arena.

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