Election-Violence Risk Threatens US Dollar Dominance
- US currency’s global role has been underpinned by rule of law
- Some investors warn of erosion of longer-term US confidence
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The scenario of another contested presidential race riven by violence looms as an unpriced risk for investors who have long counted on US institutional integrity as a foundation for the nation’s economic strength.
Owning the world’s dominant currency has helped hold down US borrowing costs and the prices of commodities from oil to iron, along with conferring the geopolitical power of cutting American rivals out of the global financial system. Underpinning the dollar’s dominance, according to Federal Reserve Chair Jerome Powell, Treasury Secretary Janet Yellen and their predecessors: the rule of law and institutions that transcend individual politicians.