When Jay Powell, US Federal Reserve chairman, gave a news conference this week, investors were on red alert about what he might say about the dollar. No wonder.
As recent crises in Turkey and Argentina have shown, a rising greenback — and higher US interest rates — puts emerging market borrowers in a vice, making it crucial to know whether the Fed is seeking a stronger dollar.
In the event, Mr Powell was non-committal. But as investors ponder the dollar’s price, there is a second issue they should watch: the role of the American currency in the financial system. Something rather unexpected is occurring on this front.
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