Media outlets had reported on comments made at the Qatar Economic Forum on 20 May 2025 by Mr Chia Der Jiun, Managing Director, Monetary Authority of Singapore, about the US Dollar and US assets.
Mr Chia had made three points:
- There are cyclical and structural factors determining the pricing and confidence in US Dollar (USD) and USD assets.
- On the cyclical side, markets are pricing in slower growth, the prospect of higher inflation and questions over the fiscal trajectory in the US, as well as rotation into other regions and hedging of overweight exposures.
- On the structural side, the US Treasury market is fundamental and systemic to the global financial system, and there is no alternative at this point. The outlook for the structural advantage of USD assets is relatively stable for now. Could this change? This depended on the fiscal trajectory and policies in the US, whether they reinforce or take away confidence of market participants.
Mr Chia did not say that USD assets were irreplaceable.
Relevant excerpts from the panel discussion can be found below, and a video of the panel discussion can be viewed at Bloomberg Live’sYouTube channel.
Joumanna Bercetche: Der Jiun, I'd like to turn to you. On Friday, Moody's downgraded US's sovereign credit rating. You've now got no single US credit or credit rating agency that has US rated AAA. The dollar is back, you know it's down about 6% this year, 30-year yields are climbing up to 5%. As a strategic investor, has your perception of safe haven assets in the US changed because of the events over the last couple of months?
Chia Der Jiun: Thanks, Joumanna, for the question. But first of all, great pleasure to be here in Qatar. Fantastic to be in a place where it's so striking in its vision and also in its implementation of that vision.
The question has come up quite a lot, and I think, probably motivated by the events between April 2nd and April 9th, where there was a simultaneous decline in US equities, bonds and the US dollar, when traditionally the dollar has provided an offset to declining risk sentiments. That didn't happen this time and it behaved a little bit more as an emerging market asset. That generated quite a lot of discussion. I think in conversations with market participants, there is talk about an interest in rotation and diversification, and these flows have been quite varied. In Europe, the flows have been about rotation, because there's been a relatively more positive story about Europe coming out of a change in policy, and also the relative value in European assets. In Asia, I think the conversation has also been a little bit different – which is that Asian currencies were a little bit hit harder in the first phase of the tariff announcements, and with some of the better news that was coming out post-April 9th with the suspension and so on, there was a rerating of the prospects for Asia. That's one. The second, of course, is that there is generally an overweight exposure to US assets from Asian investors. A lot of it unhedged. In fact, most of it unhedged. So, some changes in that sentiment and the read of the direction of the market can cause an outsized reaction, as did happen in the last week of April, where Asian currencies did go up quite sharply.
Now, the question going forward is – how do you see this? Is this cyclical? Is this structural? And, there are elements of both going on? But we have to disentangle the two. On the cyclical side, markets are pricing in slower growth, prospect of higher inflation in the US, and questions over how the fiscal situation will be resolved in the coming months, and what the fiscal trajectory will be going forward. And then of course the rating agency’s action is a reflection of that uncertainty about the fiscal trajectory for the US. So, it's important to resolve those issues.
…
… Maybe if I can just take one or two minutes to come to an earlier point about the dollar and US assets on the structural side. In the transition, in the near term, there is some pricing in of some of the new developments, but structurally, I think we have to think about the enduring advantages of dollar-based assets. They are the dominant safe assets for use in the financial system, deeply embedded. The $28 trillion US treasury market is fundamental and systemic to the global financial system, and there is no alternative for this point. Now structurally how could that change? I think then it becomes a question of the fiscal trajectory and what market participants, how much confidence or uncertainty market participants project onto that fiscal trajectory. That becomes important. And also, other policies that either reinforce confidence or take away confidence in US-based assets. That, for now, I think is a reasonably stable outlook, but I think the near-term is where we have to look for continued market signals.
