De-Dollarization: Narrative Or Reality?

Is De-dollarization truly a reality, or is it just the current narrative that is dominating the headlines today? A recent post on Zero Hedge by Lance Roberts dives into the details and separates the narrative from the hard data. Many of the points included are things that I myself have been echoing for some time now. Lance makes the case that despite the dominant consensus being that the dollar is essentially in freefall and is trading at unprecedented levels which jeopardize the dollar's reserve status as well as the attractiveness of US equity markets for foreign investors, the dollar's current price vs. other currencies is nothing more than historically average at best. He also points out that since 2008, the DXY has been in a secular uptrend and still is despite what one would think based on current sentiment. These key points are arguments that I have made over the last year and I think we can dive even deeper into some of the narratives that are out there: 1) "In 2025, the dollar had it's worst year since 1974". While this is true, it is important to remember that context matters and pretty much any argument can be made to fit your narrative if you get to cherry pick your starting point. What do I mean by this?

DXY from Q4 '24 to Q1 '26

I mean that it is utterly ignorant to paint a picture about the DXY's decline in 2025 while choosing to leave out the fact that in Q4 2024, the DXY rallied from 100 to 110 before topping at the start of 2025. Is it down still from the low end of the range in 2024? Yes of course, but 3-4% is a gigantic difference from the -12% headline number that is being pushed around. 2) "The dollar's drop is making US equities uninvestable to foreign capital". There is some truth to diversification into foreign markets and of course precious metals however, these DXY levels are hardly at any type of extreme.

DXY is trading at the historical mean.

In fact, the DXY is currently trading at almost the exact halfway point between it's historical range. Needless to say this is nothing close to being at any sort of "breaking point" for the current financial regime. Has the speed of the decline this past year been a factor? Sure, which is why we have seen the response in precious metals and foreign indexes, but rapid changes in currency or bond markets have always caused reflexive moves in equities, this is nothing new and has been a thing since the beginning of time. Speaking of the "speed" of the decline, we're made to think the dollar has been in complete freefall every single day for the last year when in reality the DXY is currently trading within about 1-2% of where it was after the Liberation Day low. It has been fairly rangebound since then which doesn't explain why foreigners would be losing so much to the exchange rate from that point forward like we are being told. Also, what about the DXY's drop in 2017, 2020, and quite honestly, most of 2025? Did US equities perform poorly those years? Quite the opposite in fact.

Record foreign inflows into US stocks in 2025

As for the exchange rate, if that was going to cause a $30T mass exodus from US stocks like some are predicting, then why did foreigners pour a record amount of capital into US equites in 2025? https://x.com/Barchart/status/2007320850459177280?s=20 3) "The DXY is in a long term downtrend". The DXY has been in a downtrend for 12-14 months. However zooming out we can see that it has been making higher highs and higher lows since the late 2000's which means it is still in a secular uptrend until proven otherwise.

DXY has been in a secular uptrend since 2008

I say all of that to say this - have we recently seen the most aggressive amounts of diversification outside of the dollar maybe ever? I'd say yes, but even if this is the start of a much bigger unwind, this process is something that could quite literally take decades to play out. As for what the alternatives are, well foreign governments and bond markets are not all of a sudden any less of a mess than they were before. There's a reason European bonds yields are so "juicy". There's a reason why countries still don't trust China (we're told that these guys are now the authority in the precious metals market. Give me a break), and there's a reason why gold cannot both fix the global debt bomb without also destroyed the cushy growth numbers that central bankers and governments covet so much. At the end of the day, if there was a liquidity crisis in literally any other country (ahem, South Korea, Argentina), they would be on the phone begging for dollar swaps because that is the ONLY option they have, full stop. This "de-dollarization" move can take years or even longer to play out and traders that are making bets with current futures contracts on such an event that cannot risky strategy, especially when that overall consensus and positioning is piled into that same trade. In conclusion - I am NOT saying that the dollar is a screaming buy here, nor I am not saying that the dollar can't go lower from here. I am saying that the current narrative does not line up with the actual data and that being short dollar futures based on an incredibly long term potential outcome creates significant amounts of right tail risk for the DXY which I believe is not being priced in to the current market. 🔐For access to premium trading content including swing trade alerts & live day trading room visit 👉 - https://www.carnivoretrades.com/ 

🎥 Youtube - @carnivoretrades

🐦X - @aaronbasile

📷Instagram - @carnivoretrades  

✍️Substack - @carnivoretrades