The dollar has largely held its ground over the past year, with the Federal Reserve’s index against other major currencies remaining steady and volatility at multiyear lows. Yet beneath this stability, capital flow dynamics are changing, potentially increasing the dollar’s risk.

Foreign appetite for U.S. sovereign debt is weakening while equity interest surges, reflected in a record $600bn net equity inflow to the U.S. in the year to March 2026—double the flow into government and agency bonds. This shift mirrors a broader trend: a stronger corporate profitability base and a weaker fiscal position, with AI poised to widen the gap further.

Technology is pulling equity capital into the U.S., with Korean retail investors (seohak gaemi) and Japanese households driving participation. The U.S. is also leading in blockchain innovation, from payment systems to tokenised assets, and stablecoins could expand dollar access worldwide, supporting 24/7 terms of trade and faster settlement.

Risks loom if long‑term debt buying wanes, as the dollar may lose its counter‑cyclical diversification role. Japan’s policy shifts under Sanae Takaichi and China’s renminbi internationalisation could trigger a long‑term currency battle, amplifying volatility and reshaping global financial flows.