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Dollar Upheaval: This Time Is Different

Author

Listed:
  • Jiang, Zhengyang

    (Northwestern U)

  • Krishnamurthy, Arvind

    (Stanford U)

  • Lustig, Hanno

    (Stanford U)

  • Richmond, Robert

    (New York U)

  • Xu, Chenzi

    (U of California, Berkeley)

Abstract

What can we learn from the high-frequency responses in bond and currency markets to the recent tariff announcement about the status of the U.S. dollar as the global reserve currency? The dollar depreciated by 3.4% after April 4 in spite of rising U.S. interest rates and market volatility, which is highly unusual. The willingness of foreign investors to pay extra for the safety of dollar safe assets, including but not limited to U.S. Treasury, has declined. These asset market responses suggest that investors started to question the role of the dollar as the reserve currency.

Suggested Citation

  • Jiang, Zhengyang & Krishnamurthy, Arvind & Lustig, Hanno & Richmond, Robert & Xu, Chenzi, 2025. "Dollar Upheaval: This Time Is Different," Research Papers 4241, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:4241
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    File URL: https://www.gsb.stanford.edu/faculty-research/working-papers/dollar-upheaval-time-different
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