Weighing portfolios’ greenback exposure: US exceptionalism has ‘room to run’
The US dollar’s status as a safe-haven asset is being eroded on tariff and economic uncertainties; the downgrade of the US’ credit rating; and looming questions on the US’ debt sustainability
[SINGAPORE] Investing in US dollar (USD) assets has been a no-brainer for decades. USD strength was seen as a given – many of its strengths remain today: it is the world’s primary reserve currency; it undergirds global trade; and it is also the main currency for issuance of non-US sovereign and corporate debt.
But with the fading of the US exceptionalism narrative, private clients are grappling with the big question of whether they should sell or lighten US assets and their USD exposure.
The strengthening of Asian currencies such as the Singdollar against the USD has had a material impact on returns from US assets. The price return of the S&P 500 year to date, for example, is around 2.78 per cent in USD. For SGD-based investors, this translates into a loss of 3.6 per cent.
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