Marc Chandler

Dollar hegemony isn’t as vulnerable as some like to say, write Marc Chandler and Adam Farhat.

Every few years, some geopolitical friction sends commentators racing to declare the end of dollar hegemony and the collapse of the petrodollar. The petrodollar, in this telling, is the linchpin supposedly keeping the architecture of dollar dominance standing. Money is a store of value, a means of exchange, and a unit of account.

Summary The response in the capital markets to the increase in hostilities in the Middle East has been fairly restrained, though risk appetites have been pulled back, reflected in the losses in equities.

It is not clear that a ceasefire extension is at hand. Still, oil prices are lower and equities are mostly firmer. The dollar is mixed against the G10 currencies and mostly in narrow ranges.

The Strait of Hormuz remains closed, and the ceasefire surrounding the conflict that produced that closure is better described as a pause than a settlement.

Summary The war in the Middle East continues to hang over risk-taking appetites. Oil prices are 3-4% higher today.

Summary The dollar continues to ease slowly against the Chinese yuan. Against the offshore yuan, a new three-year low was recorded today even as the PBOC set the dollar's fix slightly higher.

Summary The most immediate challenge facing investors is the double shock from the US in the form of tariffs and war. Both are impacting the capital markets today.

The market remains confident that the ECB will hike rates next week.

The greenback remains sensitive to geopolitical developments, and when news gives reason to be hopeful of an extended ceasefire, the dollar is typically sold.