King Dollar At The Precipice: Why Currency's Reign Is In Jeopardy

(MENAFN- Asia Times) A confluence of structural domestic decay and a quiet global rebellion against US financial dominance has pushed the dollar to a critical technical juncture. A breakdown here would not be a cyclical downturn but could signal a secular shift in the global monetary order.

The most potent threat to the US dollar comes not from a single administration, but from a structural flaw decades in the making: an unsustainable fiscal trajectory.

Long-term projections from the Congressional Budget Office (CBO) show US public debt on a path to exceed 116% of GDP by 2034, driven primarily by structural deficits in mandatory spending on Social Security and Medicare. This issue transcends partisan politics; it is a demographic and fiscal time bomb rooted in an aging population and the political intractability of entitlement reform.

Recent policies have acted as a powerful accelerant. The Committee for a Responsible Federal Budget estimates that President Trump's proposals alone could add over $5 trillion to the debt over the next decade.

This escalating burden is compounded by the Federal Reserve's dilemma: Faced with a slowing economy and risks of stagflation, the Fed has pivoted dovish, cutting rates and diminishing the dollar's yield advantage. This is not a theoretical risk; markets are already repricing the dollar in real time.

The global rebellion and the petrodollar question

While America weakens the dollar from within, the rest of the world has accelerated its search for alternatives. The weaponization of trade and finance under successive US administrations has catalyzed a quiet but determined global rebellion against dollar hegemony.

Force	Key Drivers (US Internal)	Key Drivers (Global External)	Impact on the Dollar (DXY)
Fiscal Decay	Structural deficits (CBO data), accelerated by unfunded tax cuts, rising debt.	Diversification of central bank reserves away from US Treasuries (IMF COFER data).	Negative 📉 (Erodes long-term confidence)
Monetary Easing	Fed rate cuts to combat slowing growth and stagflation risk.	Other central banks maintaining relatively stable or less aggressive easing.	Negative 📉 (Reduces yield advantage)
Geopolitical Shifts	Weaponization of sanctions and tariffs.	De-dollarization (China/Russia), cracks in petrodollar (Saudi), EU autonomy, BRICS+ push.	Negative 📉 (Reduces structural global demand)
Safe-Haven Status	Historical role as ultimate refuge during crises.	A deep global crisis could temporarily override other forces.	Conditionally Positive 📈 (Short-term flight to safety)

The chart that confirms the narrative

This confluence of powerful forces is reflected in the long-term chart of the Dollar Index (DXY). On the quarterly timeframe, the index is testing a critical support level around 96to 97. This is not mere chart-gazing. Data from the CFTC show speculative positioning increasingly against the dollar, mirroring the erosion of fundamental confidence.

A decisive break below this support zone on a quarterly closing basis would be a powerful technical confirmation that the dollar's secular bull run, which began after 2008, may be ending. The primary trend could be shifting from bullish to bearish.

Echoes of the 1970s

The dollar's reign as the undisputed reserve currency is facing its gravest challenge in a generation. The parallels with the early 1970s are striking: Back then, persistent US fiscal and trade deficits, exacerbated by the costs of the Vietnam War, made it impossible to maintain the dollar's fixed peg to gold.

Today, structural domestic deficits driven by entitlement spending and a global pushback against US financial leadership raise similar fundamental questions about the long-term sustainability of the current system.