The predominance of the US dollar (USD) as a hegemonic currency, although in recent years it has been the subject of superior scrutiny, it was something that there were no doubts. However, this debate has recently intensified. The economic policies of the Trump administration, especially in relation to tariffs, have generated high volatility in financial markets, leading to unusual movements for Risk-Off scenarios (feeling of risk aversion). After the «Liberation Day» (April 2), the dollar depreciated significantly, an unexpected phenomenon given its tendency to be appreciated in times of global uncertainty. In addition, the United States Treasury bonds, perceived as the active shelter par excellence, were sold massively, generating a significant increase in their real yields. The surprise was that the increase in the profitability of the bonds failed to strengthen the dollar. This disconnection between the dollar and the yields of the bonds puts on the table the debate about whether the investors are questioning the safety and liquidity of the assets called in dollars. Tariff policy, but is the sum of a set of policies that are generating high uncertainty and, above all, eroding confidence in the governance of US institutions. A good example and that could significantly impact on the dollar is the loss of credibility of the Federal Reserve (Fed) if Donald Trump decides to pressure its president, Jerome Powell, so that it reduces interest rates. The independence of the Fed is crucial to maintain the confidence of the markets in their ability to manage inflation and economic stability. If investors perceive that the Fed is yielding to political pressures, it would undoubtedly weaken the dollar in the long term. To today, it is very hurried to bet on the loss of the exorbitant privilege of the dollar, which for decades has allowed the United States, beyond favoring its economic and geopolitical influence, financing cheap and maintaining deficits on current account without facing crisis of balances of payments. Significant, it is still the dominant reserve currency. Changes in economic and fiscal policies, together with the diversification of reserves and political pressure on Fed, are redefining their role in the global financial system. The dollar capacity to maintain its dominance will depend on how the United States manages these challenges and the responses of global markets. Olivia Álvarez and Salvador Jiménez, professors of AFI Global Education.
