US government shutdown fuels anti-dollar trade
Threats of a US government shutdown are helping to drive already accelerating anti-dollar trading, warns the CEO of financial advisory giant deVere Group.
The warning from Nigel Green comes as Washington faces a looming partial shutdown that could begin at 12:01 a.m. Eastern Time on Saturday if lawmakers fail to pass a funding package.
It puts more than $1.2tn in federal spending at risk and threatens funding for major departments including Defence, Treasury, State, and Health and Human Services.
A shutdown would trigger widespread federal furloughs, disrupt official economic data, stall government contracts, and force essential workers to operate without pay, compounding macro uncertainty and lifting risk premiums in global markets.
“Repeated shutdown brinkmanship erodes confidence in US governance, and markets are likely to be starting to price political dysfunction into the dollar,” says Nigel Green.
“The anti-dollar trade reflects growing doubts about the reliability of US policymaking and fiscal discipline.”
He argues that shutdown threats undermine the perception of US assets as the global benchmark for safety.
“The dollar’s dominance rests on institutional stability, fiscal credibility, and policy predictability. Shutdown risks weaken all three pillars.
“In currency markets, uncertainty drives diversification, and diversification means less reliance on the dollar.”
The chief executive points to the scale and frequency of fiscal confrontations in Washington as a structural issue for the currency.
“When lawmakers are willing to risk funding for core state functions to advance political disputes, global investors reassess how risk-free US assets really are. Marginal shifts in perception translate into large moves in FX markets.”
He highlights how shutdown episodes inject uncertainty into the macro outlook.
“Shutdowns disrupt data releases, delay public-sector activity, and freeze government contracts. Markets dislike information vacuums. When data go dark, volatility rises and investors seek stability elsewhere,” notes Nigel Green.
He adds that the current standoff around immigration enforcement and federal agency funding deepens the sense of institutional fragmentation.
“Policy disputes escalating into funding crises signal governance risk. Governance risk feeds directly into currency risk,” he says.
Nigel Green stresses the fiscal implications of repeated shutdown threats.
“Each shutdown or near-shutdown episode imposes real economic costs through lost output, delayed spending, and weaker business confidence. Over time, these costs compound and influence debt dynamics,” he explains.
“Higher deficits without a credible fiscal framework undermine currency credibility.”
He links shutdown brinkmanship with broader diversification trends among global reserve managers.
Central banks have been reducing dollar reserves in favour of gold and other currencies for years. Political shocks accelerate that process by reinforcing the perception of US political risk.
“Global investors hedge dollar exposure during fiscal confrontations. Equity markets can treat Washington drama as background noise, but currency markets respond quickly,” he says.
Nigel Green also connects shutdown risk to monetary policy expectations.
“Political dysfunction complicates the policy outlook. Fiscal uncertainty can weigh on growth and push the Federal Reserve toward a more accommodative stance, which tends to weaken the dollar.
“Relative policy expectations drive FX markets, and uncertainty around US governance affects those expectations.”
He argues that the current environment encourages capital to seek alternatives.
“Capital flows toward jurisdictions with predictable policy frameworks. Europe, parts of Asia, and emerging markets with credible fiscal regimes attract flows when US politics appear unstable.
“The anti-dollar trade reflects a global search for policy certainty.”
Nigel Green cautions that repeated shutdown threats could have long-term implications for US financial leadership.
“The US has benefited from an exorbitant privilege rooted in trust. Trust accumulates slowly and erodes quickly.
“Each shutdown threat chips away at that trust, and marginal shifts matter in currency markets.”
The dollar remains dominant and the world’s primary reserve currency, yet vulnerability is increasing.
Nigel Green concludes with a stark outlook for policymakers.
“If shutdown brinkmanship becomes even more routine, investors will continue to diversify away from the dollar, and reversing that shift will be difficult.
“Currency leadership rests on credibility, and credibility erodes when governance looks unstable.”