Deutsche Bank has warned about potential risks to the US dollar’s position as the world’s reserve currency. Concerns mainly revolve around the reliability of the Federal Reserve in providing liquidity, especially through dollar swap lines. Following unofficial discussions among European central bank officials regarding the Fed’s commitment to providing support in market stress conditions, Deutsche Bank analysts believe any reduction in this liquidity could trigger significant efforts to reduce dependency on the dollar among US allies. They argue that doubts about the Federal Reserve’s role as the ultimate credible lender could lead to decreased foreign investment in US assets and weaken the dollar’s position in the global financial system. This report also references the geopolitical tensions of the Trump presidency era and emphasizes that further erosion of confidence in US financial institutions could have serious and far-reaching consequences.
