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<\/p>\nThe Reserve Bank has questioned whether the US dollar is losing its status as the world’s safe-haven currency.<\/p>\n
The greenback has been considered the world’s reserve currency for decades, or at least since the early 1970s.<\/p>\n
Speaking at a gathering in New York City, RBA deputy governor Andrew Hauser told a room of academics, market economists, and policy makers, that even defining an asset’s safe-haven status was treacherous territory.<\/p>\n
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Andrew Hauser says the US dollar has been depreciating in the face of widespread uncertainty over US policy. (AAP: Lukas Coch)<\/p>\n
“As Captain Cook found when, heading home at the end of his famous voyage in 1770, he grounded his ship HMS Endeavour on the Great Barrier Reef,” Hauser told the gathering.<\/p>\n
“In mortal danger, the crew found a promising river estuary \u2014 known as Waalumbaal Birri by the local Guugu Yimidhirr people \u2014 in which to conduct repairs.<\/p>\n
“But the winds were so fierce, and the water so crocodile-infested, that it took them another week to stagger far enough inland to beach their leaking boat on a mudbank.”<\/p>\n
“Defining a safe-haven asset,” he quipped, “can be equally challenging.”<\/p>\n
Hauser’s speech noted that market participants typically identify three main characteristics of such assets: security (minimal credit risk); an inverse correlation with the value of risky assets; and liquidity.<\/p>\n
On the first point, he said, “There is little sign yet of a persistent decline in perceived security [of the US dollar].”<\/p>\n
The second point, according to Hauser, can be challenged.<\/p>\n
“The US dollar has obviously not played what some claim to be its ‘usual’ role in key periods over the past 12\u201318 months \u2014 depreciating, rather than appreciating, in the face of widespread uncertainty over US policy, and a sharp fall in equity prices last April,” he said.<\/p>\n
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The US dollar remains close to half of all reserves. (AAP: Lukas Coch)<\/p>\n
On “liquidity”, or the ease of which US-denominated assets can be easily converted to cash, Hauser also raised some concerns.<\/p>\n
“The feature that matters most for many, including us central bank reserves managers, is liquidity,” he said.<\/p>\n
“The pre-eminent role of the US dollar in cross-border payments and invoicing, banking claims and debt issuance has long allowed US sovereign assets to command a liquidity premium (or ‘convenience yield’).<\/p>\n
“On some measures, that ‘specialness’ deteriorated in 2025 compared with earlier years, leading some commentators to make the eye-catching claim that it may presage the end of the dollar as a reserve currency.”<\/p>\n
New trend emerging<\/p>\n
But, he argued, “Here too it is worth keeping our feet on the ground.”<\/p>\n
“US [foreign exchange] fx and treasuries remain by far the most liquid of the ‘traditional’ safe-haven markets,” he said.<\/p>\n
Australian dollar at a critical crossroads<\/a><\/p>\n The value of Australia’s currency could move significantly up or down depending on the direction of interest rates. But the global economic backdrop will also be crucial in determining its direction.<\/p>\n But another trend is emerging which, some analysts argue, does point to less interest in the US dollar as a safe-haven asset.<\/p>\n And in Hauser’s speech, he lays it bare.<\/p>\n “In aggregate, official reserves [central bank reserves] have diversified away from the US dollar, principally towards gold and ‘non-traditional’ currencies, according to International Monetary Fund (IMF) data,” he noted.<\/p>\n “And reserve managers told last year’s OMFIF survey that that diversification could go further in the near term, reporting geopolitics to be their top long-term investment challenge.”<\/p>\n However, the dollar remains close to half of all reserves, similar to, or even a little higher, than in the early 1990s.<\/p>\n Demand from foreign investors<\/p>\n The past 11 months have seen an extraordinary run-up in stock markets, especially in the United States.<\/p>\n And, this, Andrew Hauser said, has moved money away from debt markets, and the US dollar, and towards shares.<\/p>\n This, he argued, has deflated the US dollar.<\/p>\n