Is this the beginning of the end for dollar domination?

The dollar is nearing a three-year low amongst fears Donald Trump’s big, beautiful bill will make the US’s debt pile unsupportable. Already at a colossal $36.2 trillion, Trump’s bill is seeking to raise the debt ceiling by a further $5 trillion, an act even Elon Musk is describing as a “disgusting abomination”.

Soft economic data, a dovish Federal Reserve and ongoing international trade tensions are further fuelling these fears, leading to what has been dubbed a “sell America” wave. This has already seen many global stock markets outperform the US this year, for the first time in several years, and havens such as gold are at all-time highs as investors hedge their bets against the world’s biggest economy.

However, the dollar’s fall may also be representative of a wider structural recalibration of the global financial system.

While current issues may have accelerated the recent fall in the dollar, a more enduring underlying trend would suggest continued weakening over the longer-term. According to recent data from the International Monetary Fund, the US dollar now makes up just 58% of global reserves, down from 73% at the beginning of the century.

This shift reflects a growing caution from central bankers toward the dollar, who are increasingly diversifying into the euro, yuan, yen, sterling and other currencies. Parallel to this, various nations have sought to reduce their reliance on the dollar for international trade, a process known as “de-dollarisation”. China has accelerated efforts to settle energy trades in yuan, while countries like Bolivia, India, and members of the BRICS+ bloc are exploring regional payment systems and bilateral agreements that bypass the dollar altogether.

What is currently unfolding, therefore, may not merely be a currency correction, but part of a systemic realignment. Although the move away from the dollar could appear somewhat glacial in the fast-moving world of financial markets, it may also prove inexorable, bringing into question the dollar’s immutable status as the world’s reserve currency.

If the US wishes to maintain the dollar hegemony that has existed since the Bretton Woods Agreement of 1944 it will likely have to display an increasingly responsible approach to fiscal credibility. In an interconnected world with evermore alternative financial systems gaining traction, complacency on behalf of US policymakers may no longer be an option, however big and beautiful things may seem.