Will King Dollar lose his crown?
“Will the fall of Kabul now bury belief in a world led by the US as its sole superpower?”, asks Louis-Vincent Gave of Gavekal Research. Can “US military prestige survive a defeat at the hands of untrained farmers driving Toyota pickups?”
The US has bounced back from military disaster before. But events in Kabul could come to mirror Suez. Declining US prestige is bullish for gold (the ultimate safe haven) and oil (because of the risk of “heightened tensions in the Middle East”). It is also “bullish for the renminbi… as China is the rising power in Asia”. Above all, it could prove “bearish for the US dollar”.
The US dollar is the world’s leading reserve currency. Investors turn to US assets as a safe haven in times of turmoil. Worries that the Delta variant will hurt global growth have thus given the greenback a boost of late. The US dollar index, which tracks the currency’s value against a basket of six…
