In stock market investing, technical analysis focuses more on who is buying the stock than on the security itself. Techniques like candlestick charts have the potential drive value creation to some extent, but the most critical question at the end of the day is still whether the investment target has a business model which can make money.

The topic of de-dollarization has been discussed with increasing intensity over the past decade or more, from the RMB internationalization post-financial crisis to BRICS and the seizure of Russian assets after its invasion of Ukraine. These discussions have extensively focused on the medium of exchange function of currency, looking at transaction statistics and infrastructure development. Because the financial instruments associated with reserve currency status involve debt rather than equity, creditworthiness can sometimes be neglected for long periods, but that era of financial ‘peacetime’ may be coming to an end.

Recent challenges to the independence of the US Federal Reserve are a classic sign of fiscal dominance, in which a central bank finds itself unable to raise rates appropriately to prevent inflation due to political pressure. Even if president Trump succeeds in influencing short-term rates, however, it would not pass through to the longer term, which may help explain why the US has been moving toward shorter-term debt issuance. The 30-year yield is 4.8% as of August.

The problem for the US is not so much that there is no possible growth story that could be told – AI is a genuinely exciting development, and the US remains the world leader – but rather that the upside potential is increasingly also balanced by downside risk. A July research paper by the financial services company State Street finds a “secular decline in the convenience yield of Treasuries,” noting their decreased utility as a defensive hedge.

The question for investors now will not be who has the gimmicks, but rather who lacks glaring vulnerabilities in the longer term. It was an over-emphasis on the former question which caused the renminbi to even be seen as a possible contender in the race for second place at all. Questions about the openness of China’s capital account are downstream from fiscal issues to a much greater extent than political ideology or payment rails.

To be sure, however, every major economy in the world now faces longer-term challenges, with common themes including demographics and (outside of China) immigration and its political backlash. The dollar depreciation over the course of 2025 has led to appreciation in the euro as investors scramble to find an alternative market capable of absorbing a large amount of liquidity. The fiscal challenges of the eurozone are not hypothetical, considering the challenges it experienced in the previous decade, but might just be controllable.

Peripheral economies including Italy, Spain, and most notably Greece have finally been showing signs of stabilization. In an ironic sign of possible eurozone unification, however, it is the central economies which now have the biggest question marks.

France has been beset by ongoing political instability which traces back in large part to a 2023 decision by President Macron, reasonable in light of fiscal and demographic realities, to raise the retirement age from 62 to 64. Germany has some of the most complex problems, although with a longer runway considering its history of fiscal conservatism. Long known for its industrial exports, it is now caught in a pincer between energy costs on the supply side and export competition from a world-class Chinese EV sector on the demand side. It remains to be seen whether capital inflows will be directed to productive uses which might help it, along with Europe as a whole, to escape its predicaments.

Finally, the trade war with the US is creating unpredictable dynamics. The recent imposition of a 15% tariff cooled off some of the optimism from earlier in the year, although the euro remains elevated overall. Europe will not be able to rely much on trade to fill in its fiscal gaps. An elevated currency even has the potential to promote a deterioration in the trade balance, the same factor which helped inspire the US trade war. Politically, Trump hopes that Europe will respond to his tariffs by erecting its own trade barriers with China.

As many issues as the EU to work through, not the least due to its proximity to the Ukraine war, it is on its way to becoming the “cleanest dirty shirt” – a term which has often been applied to the US dollar in the past. If this shift does occur, however, it will be attributable to its core creditworthiness relative to realistic alternatives, not to quirks in the international banking system.