The incredible shrinking dollar - Unhedged Recap

Podcast: Unhedged

Published: 2026-01-29

Duration: 25 minutes

Summary

The episode examines the declining value of the U.S. dollar, its impacts on global markets, and speculates on the next Federal Reserve chair.

What Happened

Katie Martin and Robert Armstrong discuss the recent decline in the U.S. dollar and its implications for global investors. They note that while U.S. stocks and bonds seem stable, the dollar's depreciation reduces returns for international investors. The dollar index has dropped over 2% in 2026, with sterling and euro gaining as a result. They attribute part of the dollar's decline to a lack of trust in U.S. macroeconomic policies, citing mixed signals from the U.S. government and a potential crisis in leadership at the Federal Reserve.

The episode highlights the Swiss franc's surge due to global instability, causing challenges for Switzerland's economy. The country faces the threat of disinflation or deflation, potentially requiring negative interest rates or dollar purchases to manage currency strength. Similarly, the Japanese yen has seen unique interventions, with the U.S. Treasury conducting an unusual rate check, hinting at broader concerns over Asian currencies.

Throughout the episode, concerns are raised about the U.S. dollar's long-term dominance. The hosts discuss 'termites' eroding confidence in the dollar, such as U.S. political instability, macroeconomic policy doubts, and eroding rule of law. Despite these concerns, U.S. assets remain crucial to global investors, who are hedging against dollar volatility rather than abandoning U.S. markets.

The conversation turns to the search for a new Federal Reserve chair, with speculation around potential candidates like Rick Rieder and Scott Besant. The hosts debate how the uncertainty surrounding this decision impacts the dollar. They suggest that a resolution could stabilize the currency, especially if a candidate like Rieder, known for favoring low interest rates, is chosen.

The episode also explores the implications of the U.S. Treasury's involvement in the Japanese yen market, a rare occurrence that signals potential concerns about currency crises spreading to the U.S. Theories about this involvement include attempts to prevent Japanese market volatility from affecting U.S. rates or to encourage Japanese investment in the U.S.

Finally, the hosts express skepticism about the U.S. Treasury's actions being a precursor to broader interventions in Asian currency markets. They end with a light-hearted segment predicting the next Federal Reserve chair and discussing Elon Musk's unconventional approach to timing the listing of SpaceX.

Key Insights