Is the Dollar Losing Its Luster?

Ken Rogoff argues the US dollar's dominance is slowly eroding due to external pressures (Iran conflict, China's push for yuan) and internal fiscal problems (rising debt, political gridlock). The outcome of the Iran conflict could accelerate or slow this trend, but the long-term trajectory is towards a more multipolar currency system.

Yields up , medium term, interviewee explicit

explicit

NDX

RUT

Oil volatile , short term, interviewee implicit

implicit

Metals

USD cautious down , long term, interviewee implicit

implicit

Harvard 8.0
University
Ken Rogoff 9.0

Is the Dollar Losing Its Luster?

USD; yuan

dxy

Rogoff argues the dollar's dominance is slowly eroding due to external pressures (Iran conflict, China's push) and internal fiscal problems. He states the premium on long-term US debt is gone and the US is losing benefits from the dollar's status, implying a long-term cautious decline.

wti

Rogoff mentions oil is a very flexible price that can move very fast, and references Brent crude moving, implying short-term volatility due to the Iran conflict.

yields

The Iran war has raised global interest rates, they were going up and up.

12 calls

+1

no reliable edge (random outcomes)

5/29/2026 11:13:17 AM	medium term up	21 days later	-0.54%	-0.54%
4/15/2026 4:14:06 PM	medium term up	20 days later	+1.09%	+1.09%
4/3/2026 12:20:17 AM	medium term up	21 days later	+0.02%	+0.02%
1/31/2026 3:00:44 PM	short term cautious down	7 days later	-1.80%	+0.90%
12/9/2025 1:32:13 AM	medium term cautious up	20 days later	-0.82%	-0.41%
11/1/2025 2:00:00 PM	medium term cautious down	21 days later	-1.66%	+0.83%
9/17/2025 1:00:49 PM	long term up	60 days later	+0.71%	+0.71%
9/5/2025 11:17:40 PM	short term cautious down	7 days later	-0.30%	+0.15%
9/4/2025 12:03:38 AM	short term cautious up	5 days later	-1.32%	-0.66%
8/16/2025 2:06:17 AM	short term cautious down	7 days later	-1.52%	+0.76%
8/8/2025 8:34:45 PM	short term cautious up	7 days later	+1.59%	+0.80%
8/4/2025 4:53:03 PM	medium term cautious down	20 days later	+1.88%	-0.94%

Show all 12 yields results

The Iran conflict may affect the status of the US dollar, which is declining gradually over time.

Westin
Ken Rogoff

The Iran conflict will affect the dollar's decline, but the outcome is uncertain. A US triumph could strengthen it, while a strategic defeat could help China accelerate de-dollarization.

The conflict is a step in a dynamic that was already happening. It will help China get other countries to use its currency, especially for imports like oil.
Ken Rogoff

The US is the biggest debtor in the world and loses the most when global interest rates rise, creating internal pressure on the dollar.

There is pressure from outside (countries seeking alternatives) and inside (large debt, lack of political will to manage it).
Is currency strength reflective of military strength, and is the Iran conflict a barometer of perceived US military strength?

Westin
Ken Rogoff

Military strength is a piece of being the dominant currency, and being perceived as weaker hurts the dollar.

Military power affects negotiations on IMF and global banking regulation. The dollar's market share peaked 10 years ago.
If the US does not triumph over Iran, does it undermine Gulf States' confidence in the US dollar?

Westin
Ken Rogoff

Gulf States are an important anchor for the dollar, but their confidence is uncertain. They question US commitment to their protection.

Saudi Arabia is still pegged to the dollar, but it's unclear how long that will last. Gulf States hold many dollars but are questioning US motives.
Will the yuan benefit from the Iran conflict, as Iran may sell oil in yuan?

Westin
Ken Rogoff

China is doing quite a bit in crypto and yuan to avoid sanctions, which is significant for de-dollarization.

If they get paid in dollars, the US can sanction them immediately. They are putting it hostage.
Ken Rogoff

The Iran war has raised global interest rates, adding to pressure for a multipolar system and exposing US fiscal problems.

There is no political consensus on taxes. The US is racing towards a fiscal problem, which could undermine central bank independence, similar to the 1970s.
What metrics should people use to gauge the dollar's relative prominence? Was it surprising the dollar wasn't a safe harbor when the Iran conflict broke out?

Westin
Ken Rogoff

The premium on long-term US debt is gone, though short-term debt still has a premium. The US is losing benefits from the dollar's status.

Finance papers show the premium on longer-term debt is gone. Borrowing more short-term is risky. The dollar's dominance is slow-moving but visible in interest rate spreads and reserve choices.
Ken Rogoff

The dollar's dominance is eroding slowly, driven by government actions (China, Europe) rather than the private sector.

We see it in interest rate spreads, reserves, and actions to develop independent systems. It's not happening overnight.

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