Global diversification, weaker USD raise questions about the greenback’s future

The greenback’s status as the world’s go-to reserve currency is facing mounting pressure, with global investors questioning its long-held dominance amid economic and political turbulence, writes Bloomberg. While the USD still accounts for 60% of global reserves and is used in roughly 90% of all FX transactions, signs of erosion are emerging. A weaker greenback undermines the US’s ability to run persistent deficits and maintain global influence — both military and financial — and is beginning to push investors to seek safer, more diversified currency exposure, writes the business news information service.

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Investor anxiety began building when the tariff-driven trade regime of President Donald Trump returned in April. The USD index has since plunged 10% — its worst first-half performance since 1973 — as sentiment toward US assets soured. This wave of uncertainty also dragged down demand for US Treasuries, raising funding costs for Washington and exposing America’s fiscal vulnerability.

The retreat from the US and the USD is translating into a growing appetite for international exposure. Global non-US equity funds logged their biggest monthly inflows in more than four years in July, drawing USD 13.6 bn, while US-focused equity funds saw USD 6.3 bn in outflows during the same period. Investors are leaning toward Europe and emerging markets where valuations are lower, monetary policy is looser, and the political environment is comparatively more stable.

Mixed messages from Washington aren’t helping, with Trump’s Fed nominee Stephen Miran openly describing the USD’s reserve status as a burden, while Treasury Secretary Scott Bessent continues to defend its global role. The Trump administration’s broader agenda — including centralizing federal authority and attacking institutional independence — is also making global investors nervous.

But despite the exodus, no single currency has yet emerged as a credible alternative to the USD. The EUR is limited by fragmented governance, the CNY remains shackled by capital controls, and gold is illiquid and yield-free. Crypto and stablecoins, while growing, are still speculative or USD-pegged. Most analysts agree we are headed toward a more multipolar currency world, with the USD still dominant, but sharing space with other currencies.

MARKETS THIS MORNING-

Asian markets are mostly in the green in early trading this morning, with Japan’s Nikkei leading gains, up 0.8%. The Shanghai Composite and Hang Seng are also in the green, up 0.5% and 0.3%, respectively, while the Kospi is looking at losses of 1.3%.

THE CLOSING BELL: TADAWUL-

The TASI rose 0.6% yesterday on turnover of SAR 3.2 bn. The index is down 9.5% YTD.

In the green: Lazurde (+9.4%), HB (+7.7%) and Dar Alarkan (+5.2%).

In the red: Tamkeen (-3.0%), Cenomi Retail (-2.1%) and Naseej (-1.9%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.1% yesterday on turnover of SAR 58.9 mn. The index is down 15.4% YTD.

In the green: Aljouf Water (+11.6%), Alashghal Almoysra (+9.1%) and Food Gate (+9.0%).

In the red: Time (-19.0%), Osool and Bakheet (-9.9%) and NBM (-7.0%).

CORPORATE ACTIONS-

#1- Al Jouf Agricultural Development’s board greenlit the distribution of a SAR 21 mn dividend payout for 1H 2025 at SAR 0.7 apiece, it said in a disclosure to Tadawul yesterday. The distribution date is slated for 30 October.

#2- Saudi Azm for Communication and Information Technology’s board recommended the repurchase of up to 1.2 mn shares through its internal resources, it said in a Tadawul disclosure yesterday. The move — still pending approvals — aimed at allocating the buy-back shares to the employee shares program.

#3- Canadian Medical Center’s board approved a SAR 3.85 mn dividend payout for 1H 2025 at SAR 0.05 per share, it said in a disclosure to Tadawul yesterday. The payout is set to be distributed on 26 October.