Three Long-Term Forces Shaping The Dollar

This report examines three long-term structural forces impacting the US dollar: the shift toward equity-funded deficits, the competition between US asset tokenization and RMB internationalization, and the ongoing valuation themes in Asian currencies.

Key Takeaways

• 1.A structural rotation is occurring in how the US funds its external deficit, moving from debt-based to equity-based flows which increases dollar risk.
• 2.US financial innovation through tokenization aims to expand access to US capital markets, contrasting with the RMB's internationalization push in Asia.
• 3.Asian currencies remain structurally cheap, but their trajectory is influenced by diverging national industrial strategies and Japan's evolving debt management.

Table of Contents

• Three long-term forces shaping the dollar
• 1. Geopolitics versus technology: a rotation in flows should mean a riskier dollar.
• 2. San Francisco to Singapore: US tokenization to RMB internationalization.
• 3. A continent of cheap currencies: is Asia for turning?
• Appendix 1

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