US Dollar Dominance Faces Historic Pressure as Global Trade Dynamics Shift

2026-02-22 economy

New York, Sunday, 22 February 2026.
As gold breaches $5,060 and the dollar posts its steepest decline in eight years, the greenback’s status as the global reserve anchor is fracturing. With US deficits projected to hit $3.1 trillion, investors are actively pivoting toward a multipolar financial order to hedge against escalating volatility.

Fiscal Strains and Monetary Policy

The fiscal outlook for the United States has deteriorated sharply, raising concerns about the long-term stability of the currency. The Congressional Budget Office (CBO) recently revised its 10-year cumulative deficit projection upward by $1.4 trillion, bringing the total to a staggering $23.1 trillion for the 2026–2035 period [5]. Deficits are expected to expand aggressively, starting at $1.9 trillion in 2026 and rising 63.158% to $3.1 trillion by 2036 [5]. This fiscal expansion is occurring alongside acute stress in the plumbing of the financial system; on February 14, 2026, the Federal Reserve was forced to inject $21 billion to prevent a collapse in the repo market [5].

Trade Wars and Market Volatility

Compounding the uncertainty, the US Supreme Court ruled against President Trump’s tariffs on February 19, 2026 [7]. In a swift response that has rattled global markets, the President declared his intention to impose a 10% global tariff under Section 122 [7]. These geopolitical and legal battles have weighed heavily on the currency, with the US Dollar Index (DXY) dropping roughly 1% since the beginning of 2026 [3]. This follows a difficult year for the greenback, which experienced a 9% decline in 2025—its most significant annual drop in eight years [3].

The Rise of Hard Assets and Future Outlook

Investors have responded to this fragility by fleeing to hard assets, driving gold prices to historic highs. The metal has appreciated over 70% in the past year, hitting a daily high of $5,451 on January 30 [3][7]. As of February 13, 2026, gold was trading firmly above the psychological $5,000 mark at $5,065 [7]. Despite these signals of eroding confidence, the International Monetary Fund (IMF) maintains that the dollar’s role remains central, noting that its share of international reserves has held stable at approximately 58% to 59% since 2020 [8]. However, analysts warn that while a sudden collapse is unlikely, the current trajectory suggests a gradual transition toward a multipolar currency system where the dollar shares prominence with regional alternatives [1].

Sources

De-dollarization Forex