Deltec's Think About This - '$ Down... But Not Out | Page 4

Think About This
INVESTMENT RESEARCH
Dollar devaluation and the fact that extraordinary
money printing is the driver of markets is
particularly helpful for alternative stores of wealth
(eg Gold and cryptocurrencies). These are some of
our biggest positions and they continue to
perform exceptionally well. Regardless, we do not
think there is yet any credible alternative to the
Dollar as the global reserve currency.
At 62% of global foreign exchange reserves, no
other market is large or liquid enough to substitute.
International corporations still issue huge
volumes of USD bonds knowing it is the currency
where funding is most freely available. 60% of
global bond issuance is in Dollars. And despite
China and Russia (among others) positioning to
reduce the USD share of their FX reserves, the
Dollar continues to dominate international trade.
MAJOR CURRENCIES AS A SHARE OF GLOBAL FX RESERVES
100%
90%
80%
% of allocated reserves
70%
60%
50%
40%
30%
20%
10%
0%
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
US Dollar
Euro Japanese Yen British Pound
US DOLLAR VS EURO SHARE OF FX DENOMINATION
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
88%
60%
62%
32%
24%
20%
FX-denominated debt issuance FX turnover Allocated global FX reserves
US Dollar
Euro
Gold, cryptocurrencies, the Yuan, and the Euro are each likely to run ahead at different times. As we
regularly communicate to clients and partners, we are particularly interested in non-fiat alternatives that
benefit as real interest rates are crushed by policy actions. But the scale and status quo bias of the Dollar
are very strong forces to overcome. And when volatility next jumps, we think the Dollar will show itself to
be a haven yet again. There have been too many reports of the Dollar’s death.
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Deltec Bank & Trust Limited