Dollar's slump offers opportunity for euro

EU officials say now is the time to strike

- ESHE NELSON

President Donald Trump's shake-up of the global trade system has sent tremors through the longheld view that the United States is the source of the world’s safest financial assets. That's created an opportunity for Europe.

The market tumult in which inves-tors simultaneously sold off the US dollar, American stocks and US Treas-ury bonds eased last week as Trump backed off his threats to fire the Fed-eral Reserve chair, Jerome Powell, and Treasury Secretary Scott Bessent tried to reassure foreign officials that trade deals would be struck.

But many European officials attend-ing the spring meetings of the Interna-tional Monetary Fund and World Bank in Washington last week were sceptical that the uncertainty over Trump's trade policy would dissipate any time soon. They said the unpredictable nature of the Trump administration's approach to setting policy would not easily be for-gotten. Instead, they saw the potential to attract investors to European assets, from the euro to the bond market.

“We see that our stability, predict-ability and respect for the rule of law is already proving a strength,” Valdis Dombrovskis, the European commis-sioner responsible for the trade bloc’s economy, said on Wednesday in a discussion on the sidelines of the IMF meetings. “We already have stronger investor interest in euro-denomi-nated assets.”

The most comprehensive indication that funds are flowing to Europe: Since the beginning of April, the euro has gained 5.4% against the dollar, rising above $1.13, the highest level since late 2021.

The question among policymakers and investors is whether the recent jump in the euro and other euro-denominated assets is simply a short-term rebalancing of portfolios that heavily favoured the dollar or the begin-ning of a long-term trend in which the euro firmly encroaches on the dollar's role as the world’s dominant currency.

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