{"text":[[{"start":5.9,"text":"The writer is head of FX Thematics at Deutsche Bank Research in London."}],[{"start":10.350000000000001,"text":"The dollar has largely held up over the past year despite many predictions of deeper decline. The Federal Reserve’s index of the dollar against other major currencies has remained virtually unchanged and currency volatility is at multiyear lows despite geopolitical ruptures."}],[{"start":26.75,"text":"But beneath the surface, important capital flow shifts are taking place that could make the dollar riskier. Foreign appetite for US sovereign debt is weakening, while foreign interest in US equities is surging."}],[{"start":39.9,"text":"These shifts reflect a changing world. While geopolitics is eroding foreign interest in US debt, technology is pulling enormous equity capital into the US. In the year to March 2026, the US received well over $600bn in net equity inflows. Not only was this a record sum, it was also double the flow into government and agency bonds. Net equity flows exceeded debt flows by the largest margin in history."}],[{"start":67.1,"text":"This partly reflects the state of balance sheets. The US fiscal position is weakening, while its corporate profitability is getting stronger. AI could accelerate this divergence as companies become richer and redistributive pressures on governments grow."}],[{"start":82.3,"text":"But it is not just AI returns that are attracting equity capital to the US. It is the growing ease of access. Reduced frictions have powered global interest from the Korean retail investors known as seohak gaemi (western ants) to the households of Japan. We may be at the beginning of major financial innovations in the US that amplify this trend."}],[{"start":104.5,"text":"America is leading the charge in adopting blockchain technology to modernise financial infrastructure: from payment systems to tokenised assets. The ambitions are to change the way that money moves, expanding access to the US dollar, finance and capital markets."}],[{"start":null,"text":"
"}],[{"start":121.7,"text":"Stablecoins could support dollar payment dominance by casting the dollar net wide — to anyone with an internet connection. They could also act as a settlement tool for blockchain assets where a promised future of 24/7 trading with faster settlement could have knock-on effects on behaviour. "}],[{"start":139,"text":"If water naturally follows the path of least resistance down a slope, capital could flow the same way. The US appears to be moving the fastest to lower obstacles for payments and investments."}],[{"start":149.55,"text":"Thus far, the story of the dollar appears an almost perfectly executed swap. Geopolitical leadership is being replaced by technological leadership in attracting funding. If foreign buying of long-term US debt continues to wane, this might be offset to a degree by purchases of US equities."}],[{"start":166.20000000000002,"text":"What then are the risks for the dollar? There are a few big ones to consider."}],[{"start":170.60000000000002,"text":"First, it may no longer provide diversification for a risk portfolio. Historically, demand for Treasuries has tended to be countercyclical. This meant the dollar gained or maintained value during risk corrections because investors bought Treasuries when other assets were going down. A shift to more cyclical, retail-driven equity funding would change this. The dollar would become riskier, more leveraged to AI fortunes, and more likely to decline in market downturns. "}],[{"start":200.95000000000002,"text":"Second, the world may ask for more of its money back. Japan could be the harbinger of change. Sanae Takaichi’s government has big plans for a new era of investment-driven growth. To help finance this and encourage capital to return home, the government may encourage state pension funds to change their target asset mix and alter tax incentives for Japanese retail investors. Both groups have been very active in US equities."}],[{"start":227.25000000000003,"text":"Third, exchange rates are relative prices, so a strong dollar means weakness elsewhere. Global currency undervaluation is extremely concentrated today. Six of the 10 cheapest currencies on Deutsche Bank models are in Asia — in some of the biggest industrial and demographic powers like Japan, Korea, China, and India, where the tolerance for further weakness may have been reached."}],[{"start":250.50000000000003,"text":"Finally, even as the US is opening the gates to attract capital to dollar assets, China is loosening strictures on the renminbi, pursuing efforts to internationalise its currency by making it easier to borrow in the currency outside its borders. This push and pull of capital could well be the beginning of a bigger long-term battle in currency markets."}],[{"start":279.95,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1784725070_7542.mp3"}