USD: Statecraft focus reshapes FX benchmarks – Rabobank

Rabobank’s Global Strategist Michael Every highlights how United States (US) economic statecraft is reinforcing the global role of the US Dollar (USD) through tools such as suspended Dollar shipments to Iraq and potential new swap lines for Gulf and Asian allies. He argues traditional FX benchmarks like EUR/USD, GBP/USD and USD/JPY are becoming less central in a resource- and production-driven global order.

Dollar role reinforced by statecraft tools

"The US has suspended dollar shipments to Iraq and frozen security cooperation programs with its military to try to force Baghdad to act against Iranian militias active in the country."

"US Treasury Secretary Bessent claims several Gulf and Asian allies, not just the UAE [United Arab Emirates], have requested dollar swap lines."

"Indeed, while FX markets still look at EUR/USD, GBP/USD, and USD/JPY as benchmarks, they are arguably far less important in the emerging physical economy of a new world order based on resources, industrial production, and AI."

"That’s further extends the list of potential recipients outside the cloistered ‘economic policy era’ circle of the UK, Europe, and Japan, etc., as part of a new US ‘economic statecraft era’ aimed at anchoring the global role of the US dollar on US, not global, terms."

"In short, the outcome of this US economic statecraft exercise remains unclear – but the potential economic impact is not."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)