FX.co ★ US aggressive foreign policy endangers dollar’s reign

After a few years of Donald Trump's aggressive foreign policy, the United States has begun questioning the usefulness of its aggressive stance towards allies. The Congressional Research Service has published a study showing that the economic sanctions have a serious negative effect on the US currency.

The dollar has come under strong pressure after Trump started to impose sanctions against all and sundry. Earlier, the greenback managed to remain stable despite different trade conflicts, while the 45th President of the United States began to use the national currency as a tool for achieving foreign policy objectives. However, such an approach undermines the dollar's status as the main, and most importantly, independent global currency.

A number of countries such as Iran, Russia, and Venezuela have already stepped up a de-dollarization process. Of course, all this points to a potential weakening of the American currency. However, the fact that Europe or Asian countries are seeking to cut reliance on the US dollar may significantly affect its top-dog status. Furthermore, the EU has announced that it will strive to boost the international role of the euro and build European financial infrastructure.

Many analysts are worried that the US dollar's dominance may slowly melt away. "A crash in the dollar is likely and it could fall by as much as 35 percent by the end of 2021," former Morgan Stanley Asia chairman Stephen Roach said. According to him, the main concerns are related to the current account deficit in the United States, the stronger European currency, as well as the Federal Reserve's inaction.