By Shahab Jafry

Copyright brecorder

Wednesday’s the worst day for an op-ed deadline if you like to write about Wall Street. For some reason, that’s when most of the most consequential data points come out — like the Fed’s interest rate announcement this week, laced with controversy and expectations like never before – and, given the time differential, you can never say for sure what’s going to happen by the time your piece goes to the editor.

Yet the road to this cut (25bp expected) has been so dramatic and Trump’s own antics have given so much more fuel to what a lot of people on planet forex are openly calling “the de-dollarisation drive”, and so much has already happened that would never have happened if a less erratic man ran the world’s biggest economy, that this serves as just the right pivot point for someone fascinated by global financial markets; especially how a lot of people are going to make a lot of money from all the uncertainty that has been so deliberately forced into the system.

So, Trump’s time was the first time a market bloodbath was not offset by a safe-haven surge in the dollar – remember Liberation Day? – the first time this decade that hedged inflows into US securities exceeded unhedged inflows from outside, and also about the first time since China’s been stage managing its currency that the People’s Republic is choosing to strengthen, not weaken, the yuan.

And if you’ve seen enough Wall Street movies, you can almost see those overpaid hedge fund managers salivating at the prospect of adding to dollar shorts (already down 11pc for the year) as soon as Powell cuts – no matter whether under duress or not – then buying the renminbi and a whole host of emerging market currencies that take cue from Beijing’s money market, from the Malaysian ringgit to the Thai baht to the Mexican peso to the Singapore dollar to the Brazilian real and all EMs in between. Then they’ll pile into EM FX debt and commodities like copper that are also expected to rise.

But the most fascinating part is that they’ll still come back to the US market for the best premiums.

No matter how much Trump hurts the American financial system and no matter how fat institutional investors get on dumping the dollar, they’ll still beeline for the US equity market for their biggest gains, another new phenomenon that superstar Reuters columnist Jamie McGeever calls long Wall Street, short US dollar.

And that, right there, is the trade of our time.

Foreign holdings of US equities are now at a record high. Yet almost two-thirds of the inflows into American securities are now hedged, a stunning reversal from past years when most foreign investors didn’t bother insulating themselves from currency risk. The old logic was that if US markets fell, a global panic would lift the dollar. Now, not so much. This time, foreign investors are buying stocks but dumping the greenback. And they are doing it in size.

Deutsche Bank’s FX desk calls it the first cycle in living memory where the dollar is being systematically shorted at the same time that US stocks are the most attractive game in town. The shift is so pronounced that over 80 percent of foreign inflows into US equities are now currency-hedged. Half the inflows into US bonds are too. The dollar may be the punching bag, but the Wall Street is still the ring.

It is a beautiful contradiction. Sell the dollar because Trump has wrecked the fiscal outlook, undermined the Fed, and dragged central bank independence through partisan mud. Yet buy Nvidia, because artificial intelligence is going to eat the world. Short the greenback because the Fed is about to cut while the ECB and BoJ stay neutral. Yet buy Treasuries, because liquidity matters more than solvency.

It’s not just the Americans printing money; it’s foreign investors printing returns.

And the ones smiling widest are the ones who engineered this tension in the first place. This is no place for fundamental macro calls. It’s for the big players who understand flows, positioning, narrative, and fear. The ones who can short the dollar at the top of the hour, hedge the move, and go long Nasdaq by lunch. And they will ride this beautiful, chaotic regime for as long as the Fed, Treasury, and White House keep playing chicken with each other.

Trump’s influence is baked in. He got the ball rolling with the trade wars. He shook the dollar’s pedestal with the threat of sanctions as policy. He baited Powell into rate cuts. He made the world believe that the dollar is no longer sacred. And now, he may return with a vengeance, a tariff sledgehammer, and a Fed board loyal to his vision of American greatness.

But none of that has stopped the capital from flowing in. If anything, it’s coming in faster. Hedged, protected, but hungry. Hungry for margin. Hungry for Big Tech. Hungry for another 30 percent rally in the Nasdaq. And if the dollar weakens further, all the better. That just makes the hedge more profitable.

In this brave new world, macro risk is the new alpha. You don’t avoid chaos. You trade it. You build positions for a Fed that doesn’t know its own mind. You bet against policy certainty and profit from central bank anxiety. You buy US equities and hedge the dollar risk because, well, you can.

And maybe, just maybe, Powell’s cut has triggered one last dollar spike for this cycle by now. The good old “buy the rumour, sell the fact” playbook – or rather, “sell the rumour, buy the fact” in this case? A squeeze. A fake-out. And then the move. The great unraveling of the world’s reserve currency as the ultimate hedge. Not because it’s lost its value, but because its value no longer offsets the risk of holding it.

A new kind of exceptionalism, perhaps. Not one where the dollar reigns supreme. But one where the American financial machine still offers the best returns in the worst of times. A market built for those who understand that the centre can no longer hold. And those who have figured out how to profit from the cracks.

Let the quants feast.

Copyright Business Recorder, 2025