In the face of calls around the world to diversify out of the dollar in recent years, the US has nabbed almost one-third of all the investment that flowed across borders since Covid struck.
An International Monetary Fund analysis sent by request to Bloomberg News shows that the share of global flows has climbed — not fallen — since a shortage of dollars in 2020 spooked global investors and the 2022 freezing of Russian assets stoked questions about respect for free movement of capital. The pre-pandemic US average share was just 18%, according to the IMF.
For all the angst over the dollar’s dominance, a run-up in US interest rates to the highest levels in decades proved a major draw for overseas investors. The US has also pulled in a fresh wave of foreign direct investment (FDI) thanks to billions of dollars worth of incentives under President Joe Biden’s initiatives to spur renewable energy and semiconductor production.
The trend marks a major shift from the pre-pandemic days when capital poured into emerging markets, including a rapidly growing China. The big US geopolitical rival has seen its share of gross global inflows more than halve since the pandemic hit.
But with Donald Trump pledging to reverse the key elements of Bidenomics if he wins the November election, and the Federal Reserve signalling it will start lowering interest rates later this year, the US advantages may not last.
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