For decades, the mantra for any nervous investor was: “When the world becomes uncertain, people buy the dollar.” Today, this reflex is clearly fading. We have therefore consistently and completely reduced our open U.S. dollar exposure from securities to zero.
Here are the five reasons why:
1. The bill for the war is coming
According to the Pentagon, the attack on Iran cost $25 billion. Including infrastructure damage and troop buildup, the total comes to as much as $95 billion. Harvard estimates the economic follow-on costs of higher energy prices and the temporary blockade of the Strait of Hormuz at up to $1 trillion, with an impact of -0.2 to -0.75 percentage points on GDP. The war is not being paid for out of revenue, but through debt. And increased supply is putting downward pressure on the dollar’s value.
2. Fear subsides, and with it, demand for the dollar
With peace negotiations currently underway, the acute stress has left the market. The “CNN Fear and Greed Index” stood at 14 in early April and rose rapidly to 67 points by early May: Greed.
3. U.S. debt and interest burden are growing
The U.S. is sitting on a mountain of debt totaling 39 trillion U.S. dollars. Interest payments alone now cost more than 1 trillion dollars per year. This amounts to approximately 3.3% of total economic output—a level last seen after World War II. By the end of 2026, the debt-to-GDP ratio is expected to reach 100 to 105 percent, and a year later, as high as 120 to 125 percent. This is not a new source of fear for the market; it has grown accustomed to it. The burden is no longer acute but is becoming chronic.
4. The FED under Warsh: QE through the back door
In December 2025, the Fed ended its restrictive monetary policy. With Kevin Warsh set to take office as the new Fed Chair, it is already beginning to buy short-term U.S. Treasury bonds again. Officially, this is being done for technical reasons, but it amounts to a hidden cash injection for the economy and the government. Any country that runs up debt while simultaneously printing money jeopardizes confidence in its own currency. Japan took this path years ago, and since then, the yen has largely lost its status as a safe-haven currency.
5. Interest rate differentials are narrowing
The Fed will cut U.S. interest rates. The U.S. economy will continue to grow comfortably at around 2% in 2026. According to the ECB, Europe will only grow at a rate of 1.0 - 1.3%; at the same time, sensitivity to energy prices and fears of inflation are fueling concerns about an ECB rate hike, which we would view as a policy mistake. The interest rate differentials that have supported the dollar for years are narrowing. This factor alone points to the EUR/USD trading in the 1.20 to 1.25 range.
Note: This text was translated using AI and may contain translation errors. The German version of the text is authoritative.