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The US dollar continues to hold its position as the world’s leading reserve currency, yet signs are emerging that its dominance is being steadily eroded. That view was outlined by Peter Brown, Managing Director of Bagot Investment Partners, who pointed to rising demand for alternative assets and growing structural concerns within the US economy.

Speaking on RTÉ radio, Mr Brown highlighted the strong performance of precious metals as an indicator of changing investor behaviour. Gold prices have risen sharply in recent years, while silver has seen even stronger gains, movements he believes reflect waning confidence in the long-term strength of the dollar.

He identified three key pressures contributing to the currency’s decline. The first relates to political uncertainty in the United States, particularly concerns about potential interference with the independence of the Federal Reserve. Such uncertainty, he argued, undermines confidence in US financial governance.

The second issue centres on the scale of US government debt and the challenge of continuing to fund it. Mr Brown noted that US government bonds were traditionally viewed as a safe haven, but confidence shifted after Russian assets held in US bonds were frozen. This prompted some countries to reconsider their exposure to US debt and instead favour assets such as gold and silver. As a result, demand at US debt auctions has weakened, raising concerns that the Federal Reserve may be forced to purchase more government debt itself, a move associated with quantitative easing and downward pressure on the dollar.

A third concern is the concentration of global investment in the United States. While the US accounts for roughly a quarter of global economic growth, it now represents about three quarters of the MSCI World Index. Mr Brown suggested this imbalance reflects years of heavy investment in US technology stocks, which he believes are now undergoing a correction. He views this rebalancing as a significant factor behind the dollar’s recent weakness.

For Irish consumers, a weaker dollar presents mixed outcomes. Travel to the United States and purchases of US goods become more affordable, while Irish exporters face higher costs when selling into the American market. Mr Brown noted, however, that exporters have not expressed significant concern, suggesting that profit margins remain strong despite the combined impact of tariffs and currency movements.

The more pressing issue, he argued, lies with pension holders whose investments are heavily weighted towards US equities. He cautioned that investors should reassess where future returns are likely to come from over the coming years, suggesting that growth opportunities may increasingly lie outside the US market.

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