The Dollar’s Supercycle Is Over. Where It’s Headed.

By Marc Chandler – Barrons

The dollar’s long-anticipated downturn has begun, but don’t confuse it with the talk of dedollarization. That remains exaggerated.

The greenback’s structural function in the global economy remains intact and does not stem from its leading role in invoicing or settling trade. It ultimately arises because many countries and foreign companies have borrowed dollars not from the U.S. government but in the offshore market.

The dollar DXY is on one side of about 90% of the trades in the $7.5-trillion-a-day foreign exchange market. Trends there often last five to 10 years, unlike stock and bond markets, which seem more closely tied to the business cycle. The dollar’s bull market, which we think has ended, has gone long and far.