The U.S. dollar’s status as the world’s premier currency could be at risk if the Federal Reserve intervenes in the bond market to curb rising interest rates, warns Fidelity’s Jurrien Timmer.
What Happened: With the soaring U.S. debt, Timmer’s analysis, shared on X, suggests that the Fed’s interference in the bond markets might erode the dollar’s “supremacy.” This alludes to the USD’s edge as the global reserve currency.
Timmer’s post highlighted the debt crisis, noting the rise in federal debt since March 2020, driven by COVID-era spending and a recent debt ceiling hike.
He warned of a potential “unsustainable debt spiral” if the term premium rises, forcing the Fed to suppress rates.
In a following post, he escalated the concern that “If the Fed is forced back into the bond market to hold down nominal and real rates, the dollar may well lose more of its supremacy premium.” This interference, he argued, could weaken the dollar…
