Dollar’s demise seems overdone – JPMorgan By Investing.com

Investing.com – The US dollar has had a rough summer, falling substantially in August, but JPMorgan believes those predicting the demise of the US currency are only targeting themselves.

At 06:00 ET (10:00 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, traded 0.2 percent lower at 101,127 after losing 1.6 percent during the last month.

“Diversification against the dollar is a growing trend,” analysts at JPMorgan said in a Sept. 4 note, “but we find that the factors supporting the dollar’s dominance remain well-entrenched and structural in nature.”

The role of the dollar in global finance and its implications for economic and financial stability are supported by deep and liquid capital markets, the rule of law and predictable legal systems, a commitment to a free-floating regime, and the well-functioning financial system for USD liquidity and institutional . transparency, the bank added.

Furthermore, the private sector’s real reliance on the dollar as a store of value seems unquestionable, and the dollar remains the most widely used currency in a variety of indicators.

That said, “we are seeing greater diversification and important changes in cross-border transactions as a result of sanctions against Russia, China’s efforts to strengthen the use of the RMB and geoeconomic fragmentation,” JPMorgan said.

The more important and underappreciated risk, the bank added, is the increased focus on payment autonomy and the desire to develop alternative financial systems and payment mechanisms that are not based on the US dollar.

“Risks of de-dollarization appear exaggerated, but cross-border flows are changing dramatically in trade blocs and commodity markets, along with a rise in alternative financial architecture for global payments,” JPMorgan said.