Doubts about dollar dominate gathering of economic leaders

Participants at the IMF and World Bank meetings last week reckoned with the prospect that the US safe haven could lose its lustre, writes Colby Smith from New York

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On the sidelines of the spring meetings of the International Monetary Fund and World Bank last week, US Treasury Secretary Scott Bessent tried to convey an important message about the United States dollar.

Speaking to a crowd of global policymakers, regulators and investors, Mr Bessent sought to allay fears that had ballooned in recent weeks about the dollar's global standing and the country's role as the safest haven during times of stress. He repeated that the administration would continue to have a "strong-dollar policy" and affirmed that it would remain the currency that the rest of the world wanted to hold, even though it had weakened against most major currencies.

For participants at the event, Mr Bessent's comments were a needed salve after a bruising couple of weeks in financial markets as a result of President Trump's trade war. Violent swings in stocks, coinciding with the weakening of the dollar as investors fled US government bonds, had incited panic.

The fact that Mr Bessent found it necessary to emphasise that message in front of such a big crowd underscored how precarious the situation had become since Trump returned to the White House nearly 100 days ago. What now looms large are uncomfortable questions about what happens if the international community starts to lose faith in the dollar and other US assets, something that economists warn would be costly for Americans.

"People are playing through scenarios that previously had been judged unthinkable, and they're playing them through in a very serious kind of way in the spirit of contingency planning," said Nathan Sheets, the chief economist at Citigroup and a Treasury official in the Obama administration.

"If the United States is going to pursue aggressive economic policies, it's natural for the rest of the world to step back and say, 'Well, do we want to buy US assets as we have in the past?'"

'NEW WORLD ORDER'