Growing U.S. government debt has made dollar assets unattractive to investors, according to State Street global investment director Laurie Heinel. President Trump’s trade tariffs could further push away from the dollar, accelerating the process of de-dollarization.
Investors are reducing their exposure to the U.S., according to a CoreData survey conducted in May and June this year. The data was collected from financial institutions that manage $4,9 trillion in assets. The survey found that 47% of respondents are reducing their long-term investments in the U.S. market at a strategic level.
Thierry Wiesman, global currency and rates strategist at Macquarie Group, shares this view. He believes the US dollar’s role as the world’s reserve currency could be in question as the country loses its role as a facilitator of free trade.
The U.S. recently passed a tax and spending bill that will add trillions to the national debt, a move that will exacerbate long-standing budget deficit problems.
A recent report from BlackRock reported that central banks are reducing their holdings of assets excluding the US dollar:
Diversification of assets beyond the dollar is leading to growth in other currency reserves, gold reserves and interest in emerging assets such as Bitcoin.