The dollar's long-term position: rebalancing between geopolitical and technological forces

Overview

This report, titled “The dollar in the long term Geopolitics vs. technology,” was written by Mallika Sachdeva of Deutsche Bank FX Research. It discusses the rise and fall of global currencies over a roughly two-hundred-year period and the evolution of the dollar's long-term international-currency status amid geopolitical and technological change. The material covers topics including foreign exchange reserves, government bond yields and net international investment positions, energy trade, official-sector savings in MENA, trade invoicing currencies, and cross-border payment networks.

Core views

The core view is that the dollar's international status is not determined solely by the size of the US economy, but is jointly supported by reserve accumulation, pricing in energy and commodity trade, geopolitical alliances, deep financial markets, and payment and settlement networks. The report explicitly states that the dollar's rise as a global reserve asset was related to the substantial accumulation of dollar reserves by emerging markets in the 1990s and 2000s. At the same time, differences between US and Chinese energy strategies, changes in crude oil export destinations, trade invoicing currency choices, and changes in correspondent banking and payment corridors may affect the dollar's long-term network effects.

Analysis framework

The report adopts a long-term historical-comparison and cross-asset macro framework, combining indicators such as reserve-currency shares, foreign ownership ratios, 30-year government bond yields versus NIIP, official-sector savings in MENA, crude oil export destinations, trade invoicing currencies, and payment-network activity to assess the structural support for the dollar's position and factors that could potentially weaken it.

Methodology notes

• Macro FXLong-term reserve-currency rise-and-fall framework

  Analyzes the status of international currencies through historical reserve shares, official savings, and global payment networks.

  The report title emphasizes two centuries of global currency rises and falls and cites the dollar's share of foreign exchange reserves in certain countries, indicating that its analysis is not a short-term exchange-rate forecast but a study of the long-term international monetary system.

• Geopolitical economicsEnergy and trade invoicing currency framework

  Energy flows and trade invoicing currencies affect international currency demand.

  The report discusses differing US and Chinese energy strategies, crude oil export destinations, and the invoicing currencies used in import and export trade, showing that it incorporates energy security and trade settlement into its assessment of the dollar's long-term position.

• Financial market structurePayment network and correspondent banking framework

  Cross-border payment corridors and the number of correspondent banks reflect currency network effects.

  The material refers to active correspondent banks, payment corridors, and changes in the average number of active correspondent banks, pointing to the impact of technology and financial infrastructure on the scope of dollar usage.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Dollar

  Core research subject

  Strengths

  Reserve-asset status, the inertia of trade invoicing, deep financial markets, and payment networks continue to provide support.

  Weaknesses

  Over the long term, it may be affected by geopolitical fragmentation, alternative payment technologies, and pressures toward de-dollarization in some trade flows.

  Comparison

  Compared with other international currencies, the dollar has stronger network effects, but the report emphasizes that this advantage must be dynamically assessed within a long-term historical framework.

  Risks

  US fiscal and external positions, interest-rate volatility, spillovers from geopolitical sanctions, and reserve diversification.

• Long-term US government bonds

  Important underlying assets of the dollar reserve system

  Strengths

  Depth and liquidity help support official reserve allocation.

  Weaknesses

  Long-term yields, NIIP, fiscal financing needs, and inflation shocks may affect their attractiveness.

  Comparison

  Compared with other sovereign bond markets, US Treasuries have a pronounced liquidity advantage, but macro volatility risks are also concentrated.

  Risks

  Rising interest rates, upside inflation surprises, fiscal supply pressures, and currency depreciation.

• Energy- and commodity-related currencies

  Affect dollar demand through crude oil export destinations and energy strategies

  Strengths

  Changes in energy trade settlement may expand the use cases for some non-dollar or regional currencies.

  Weaknesses

  Commodity trade settlement has strong inertia, and replacing the dollar requires support from financial markets and payment infrastructure.

  Comparison

  Differences in energy exporters' trade exposure to the US, China, and Europe may determine the flexibility of their currency choices.

  Risks

  Oil-price volatility, geopolitical conflict, capital controls, and the costs of switching settlement systems.

Key data

• Report date2026-07-08The filename date is 20260708, while the body page shows July 2026.
• AuthorMallika SachdevaHead of FX Thematics, Managing Director, FX Research.
• Research institutionDeutsche BankThe report disclosure page states that it was prepared by Deutsche Bank AG or its affiliated institutions.
• Explicit excerpted viewThe dollar’s rise as a global reserve asset was a function of the enormous accumulation of EM USD reserves in the 1990s and 2000sThe report links the dollar's reserve-currency status to emerging-market accumulation of dollar reserves.
• Key chart themesUS dollar foreign reserve share, 30Y government bond yield vs NIIP, MENA official sector savings, trade invoicing currency, crude export destinations, correspondent banking corridorsBased on the chart titles and text excerpts in the input.

Impact & implications

If the structural variables identified by the report continue to change, the dollar's long-term position may face more complex divergence. On the one hand, the depth of US financial markets, existing reserves, and payment networks will continue to provide inertial support. On the other hand, geopolitical fragmentation, shifts in the center of energy trade, non-dollar trade invoicing, and new payment technologies may gradually weaken the dollar's marginal advantage in certain regions or transaction scenarios. For asset allocation, the main impacts would be felt in the dollar index, long-term US Treasuries, non-dollar reserve assets, energy-related currencies, and cross-border payment infrastructure themes.

Risks

• The source material consists mainly of the title, chart titles, limited text excerpts, and disclosure pages, without the complete body of the report; some conclusions can therefore only be summarized based on the visible excerpts.
• The report provides no explicit investment rating, target price, or trading recommendation and should not be interpreted as an individual stock recommendation.
• Long-term assessments of currency status depend heavily on geopolitics, policy choices, technological diffusion, and market liquidity, resulting in substantial path uncertainty.
• The disclosures indicate that foreign exchange, interest rates, derivatives, and cross-currency investments may all be exposed to exchange-rate, interest-rate, liquidity, and counterparty risks.

What to watch

• The share of dollars in emerging-market reserves and the pace of reserve diversification.
• The US 30-year government bond yield, fiscal financing pressures, and changes in NIIP.
• Changes in the shares of the US, China, and Europe in trade with major crude oil exporters.
• Changes in the shares of the dollar, euro, renminbi, and regional currencies in trade invoicing.
• Cross-border payment corridors, the number of active correspondent banks, and the extent to which new payment technologies replace traditional dollar clearing networks.
• Official-sector savings flows in MENA and other regions and their impact on allocations to dollar assets.