Stocks down, yields down, dollar up. A reliable relationship between America’s listed companies, government bonds and the value of the currency has held, in moments of panic, for most of modern financial history. Until now.

During the stockmarket slumps of 2008 and 2020, for instance, the dollar rose. When investors are fearful, they normally rush to the safety of American debt, bidding up the greenback in the process. This time round, investors are eschewing Treasuries

The breakdown of the once-solid relationship reflects the impulsiveness of the current American government. President Donald Trump’s belligerent trade policy, his administration’s incompetent policymaking and some of his advisers’ suspicion about the dollar’s global role have shaken foreign investors

For eight decades, America’s currency has been the linchpin of trade and finance. About half of all lending across borders is in dollars

"The modern world has been built on the greenback."

During his time as a senator, J.D. Vance, now the vice-president, was critical of the currency’s international role, arguing that the accumulation of American securities by foreigners had artificially lifted its value, damaging American industry.

Even if dollar dominance is only diminished at the margin—with institutions reducing their holdings of American assets, rather than fireselling them—that will make America’s fiscal profligacy much more difficult to maintain. The government runs a budget deficit worth 7% of GDP and its interest bill has ballooned in recent years, meaning higher bond yields would cause profound problems

"The currencies into which central bankers are today shifting their investments are relative minnows, with stock and bond markets too small to replace the dollar."