Today on Monday (June 27), the US dollar opened at 104.12, and closed at 104.12 yesterday. So far, the highest has hit 104.14 and the lowest has been 103.95. Temporarily reported 104.00, down 0.12%. The euro and the dollar were temporarily reported at 1.0559, an increase of 0.09%; the dollar and the Canadian dollar were temporarily reported at 1.2902, an increase of 0.06%.
In early Asian trading on June 27, the U.S. dollar index was trading around 104.10, as traders scaled back bets on a possible peak in interest rates and advanced expectations for the timing of interest rate cuts in response to a possible recession. U.S. federal funds futures priced in on Friday, with a 73 percent chance of a 75-basis-point rate hike at the July meeting .
A new ” currency war” has broken out in foreign exchange markets , sparking widespread jitters: Governments and central banks have moved to defend their weaker currencies to offset the impact of a stronger dollar. This is the exact opposite of the last currency war that happened a decade ago. A decade ago, governments and central banks were looking for ways to turn things around when local currencies appreciated sharply due to the rapid devaluation of the dollar. However, with dollar hegemony likely to fall, the latest currency war may be over before it really begins.
The U.S. Treasury Department said last week that in the first four months of this year, foreign holdings of U.S. Treasuries were reduced by nearly $300 billion . While this amount is only a fraction of the U.S. government’s outstanding debt (a whopping $23.3 trillion), and foreigners still hold about $7.4 trillion in U.S. debt, importantly, signs of reduction are already emerging . Treasury holdings by the Fed on behalf of foreign central banks and sovereign wealth funds have shrunk from $3.13 trillion at the start of 2021 to a recent $2.99 ​​trillion. Likewise, despite its modest size, it is worrisome to see a decline instead of an increase.
The most worrying thing is that the dollar’s status as the world’s main reserve currency is declining. The U.S. dollar accounts for 58.8% of global foreign exchange reserves , according to the International Monetary Fund ( IMF ) , which is well below a peak of 72.7% in 2001 and the lowest percentage since 1996.
A weaker dollar could make foreign investors less motivated to buy dollar -denominated assets, making it harder to finance record budget and trade deficits. That could mean higher borrowing costs for governments, companies and consumers. The U.S. current-account deficit has driven global foreign exchange markets for 20 years , but now that may be about to undergo a major reversal.