Rabobank strategist Michael Every sets out competing narratives about the US dollar’s global role. He references Adam Tooze’s view in the Financial Times that the USD is no longer a global reserve FX, describing it instead as a “profit dollar” supported by rising asset prices. The note also frames the discussion in terms of realpolitik, contrasting financialisation with production and pointing to the absence of an alternative framework in debates over whether dollar holdings should be reduced.
Every also points to a New York Times op-ed by Mohamed El-Erian arguing that “America was being played. The Bessent Doctrine says those days are over”, and that economic statecraft is reshaping corporate and economic outcomes. In that account, national security, domestic politics and geopolitics are no longer subordinate to traditional business interests, and those business interests are being pushed aside. Attention then turns to the forthcoming Fed minutes, with a reference to the Warsh Doctrine and a question over how brief the minutes may be.
From Financialisation to Geopolitical Drivers of the US Dollar
We see a fundamental shift in what drives the US dollar, moving away from pure financial returns toward a framework of national interest and geopolitics. The idea that the dollar is just a “profit dollar” backed by rising assets is becoming outdated. We must now price in factors of economic statecraft and national security as primary market movers.
This isn’t just theory; we are seeing it in the data from the second quarter of 2026. Trade volumes between the US and geostrategic rivals have fallen nearly 12% year-over-year, while trade with allied nations has increased. This policy-driven shift in capital and goods flow is a direct consequence of the so-called “Bessent Doctrine” taking hold.
For derivative traders, this means that traditional economic indicators are losing their predictive power. Volatility will be driven less by inflation data and more by foreign policy announcements or trade restrictions. The VIX index has reflected this, maintaining an elevated average of 21 over the past six months, well above historical norms during periods of economic growth.
We’ve also noted that central banks globally are continuing a trend that accelerated back in 2022. Official gold purchases by emerging market central banks are up another 4% in the first half of this year, a clear long-term hedge against dollar-denominated assets. This quiet diversification underscores a global response to the weaponization of finance.
Market Implications and Trading Strategies in a New Regime
The Federal Reserve’s recent behaviour also signals a new era of uncertainty, which we can use to our advantage. The minutes from last month’s meeting were indeed more concise and less revealing, suggesting the Fed wants maximum flexibility in a politically charged environment. This lack of clear forward guidance will likely keep implied volatility in interest rate markets, like options on SOFR futures, elevated.
In the coming weeks, we should anticipate sharp, unpredictable swings in the dollar based on policy headlines rather than economic calendars. We believe strategies that profit from rising volatility, such as long straddles on major currency pairs like EUR/USD, are more prudent than taking a simple directional view. The dollar’s path will be choppy as markets struggle to price in these new geopolitical realities.
This logic extends to equities and commodities, where corporate outcomes are now explicitly tied to geopolitical considerations. We should consider using options to hedge exposure in sectors sensitive to national security policy, such as semiconductors and critical minerals. A sudden trade ruling could now have a more immediate impact than a company’s quarterly earnings report.
