We wrote about U.S. dollar weakness as recently as August with a view toward the ongoing pressures on the greenback including above target inflation, policy skepticism, expanding deficits, and record Treasury issuance. At the start of this week, the U.S. Dollar Index (DXY) had advanced over 3% year to date.
Is it American exceptionalism? Or is the U.S. dollar the proverbial cleanest dirty shirt in the global currency hamper?
Our hearts were heavy reading the news of violent riots across France last weekend as weeks of student protests culminated in a broader public furor over challenging economic conditions and ineffective government responses. French unemployment was 1.8% higher than the Euro area average of 6.4% in August, while France’s GDP growth in the second quarter was less than half of that of the region. Yields on French ten-year bonds have increased year to date but have remained below ten-year Treasury yields!
Higher interest rates come amid a massive AI capital cycle as corporations compete with the government to issue debt at ever higher rates. The build-out has attracted capital, both equity and debt, and everything in between. Like the U.S., Europe and Japan have seen yields increase alongside AI spending year to date. Unlike the U.S., economic growth across most of the other developed markets has not kept pace with rising rates. The Economist reported that foreign purchases of American corporate debt from July 2025 to July 2026 reached levels not seen in almost two decades, while the volume of U.S. equity purchases over that period has no precedent.
In his final annual meeting as CEO of Berkshire Hathaway in May of 2025, Warren Buffett opined, “We’re operating at a fiscal deficit now that is unsustainable over a very long period of time. We don’t know whether that means two years or 20 years, because there’s never been a country like the United States, but you know, this is something that can’t go on forever.”
Here’s hoping the shirt still fits when we finally pull it out of the hamper.
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