US Dollar assets remain dominant despite credit rating downgrade

[SINGAPORE] US dollar-denominated assets continue to hold “enduring advantages” and remain virtually irreplaceable within the global financial system, despite the United States recently losing its top-tier credit rating, according to the head of Singapore’s central bank.

“They are the dominant, safe assets for use in the financial system, deeply embedded,” said Chia Der Jiun, Managing Director of the Monetary Authority of Singapore, speaking Tuesday at the Qatar Economic Forum.

The comments come in the wake of a major move by Moody’s Ratings, which last week downgraded the US from its highest credit rating—a symbolic shift that raises questions about the country’s reputation as the most reliable sovereign borrower. The downgrade, which brings Moody’s in line with similar actions from Fitch Ratings and S&P Global Ratings, prompted an initial selloff in longer-term US government debt.

While acknowledging the potential for short-term market turbulence as investors reassess the landscape, Chia expressed confidence in the continued resilience of US dollar-based assets. He noted that markets are closely watching for signs of slower economic growth, rising inflation, and shifts in US fiscal policy that could influence investor confidence.

“There is generally an overweight exposure to US assets from Asian investors—much of it unhedged—so even small changes in sentiment or market direction can trigger outsized reactions,” Chia explained.

He pointed to the US dollar’s lasting appeal, which he attributed to its unmatched combination of stability, liquidity, and trust. Although global de-dollarization efforts could gradually erode its dominance in certain types of transactions, a wholesale transformation of the global financial system appears unlikely anytime soon.

“The US$28-trillion Treasury market is fundamental and systemic to the global financial system,” Chia said. “There is no alternative at this point.”