“Buy America!” is the message Washington broadcast loud and clear as 2026 began. But is the world listening?
“Sell America” was the battle cry this month for some overseas as fractures deepened between the U.S. and NATO allies. They showed their displeasure over Greenland by selling U.S. dollars and other assets, reinvigorating the greenback’s long-term decline and triggering a surge in prices for some commodities.
Gold surged to an all-time high, taking aim at $5,000 an ounce, while sliver’s run was even more impressive, topping $100 for the first time. But most other commodities didn’t follow suit. While precious metals became a store of value millenniums ago, other food and fiber contracts traded their own fundamentals of supply and demand – including currencies of some U.S. trading partners.
So, to paraphrase Mark Twain, are reports of the dollar’s demise as the world’s reserve currency greatly exaggerated? To cite another quote from Twain: There are lies, damned lies, and statistics.
Dollar pole position
Exchange rates were pegged to the dollar after World War II, making them a moot point until 1971. That’s when the U.S. went off the gold standard. This let the dollar’s value float according to the market rather than stay fixed at $35 an ounce, the long-term price for gold.
Even so, the dollar still ruled as the world’s reserve currency, prized as a stable medium of exchange and store of value for the reserves of banks, governments and traders.
More recently, the dollar’s pole position wavered. Institutions diversified into other widely traded currencies, reducing holdings in the U.S. even before the “Sell America” crowd joined. Ironically, these bears could trigger a dollar rally, proving yet again even Wall Street can’t have its egg and eat it, too.
Currency two-step
Currencies follow different drummers, but generally they each dance a two-step: Rising interest rates in a country lure investors seeking higher returns, and their buying increases prices of interest-rate investments such as Treasury bills, notes and bonds. But the prices of these contracts move inversely to interest rates. That is, as prices go higher, interest rates move lower. So, “Sell America” could forge “Buy America.”
Interest rates account for more than 40% of the variations in the greenback long-term. Other factors include budget and trade deficits, money supply, stock prices, corporate earnings, inflation and, as Greenland demonstrates, confidence in a country’s leadership.
The impact from interest rates is widespread, affecting costs, profits and even farmland values, all good reasons for farmers to follow this indicator. This makes the dollar’s value equally important, but not for the reason many think.
Conventional wisdom says the buying power of the dollar influences demand for grain because foreign buyers can import more if their own currency is stronger and converts into more dollars. History debunks this view, however widespread. The correlation between dollar values and grain sales is nonexistent statistically.
To be sure, at times a weak dollar coincides with strong exports, but the opposite is also true. Moreover, the net cost of supplies from competitors may not be any different once adjusted for changes in currencies. If the dollar is stronger and the euro weakens, the price of U.S. corn in dollars goes down while rising in euros on EU markets.
Watch Japan, China, Fed
Two Asian markets were especially noteworthy amid the dollar gyrations. The Bank of Japan kept interest rates near zero for close to 30 years as the country’s economy stagnated. Rising GDP lit a fire under the yen over the past two years, adding to the dollar’s demise.
Another currency to watch is China’s yuan, which fell 5% against the dollar over the past eight months from highs reached in April after tariffs threatened its large trade surplus.
But the ebb and flow of the dollar likely won’t influence where China buys soybeans. Politics matter, as Brazil and China forge greater economic and diplomatic ties. Weather could be the driving source, if the U.S. raises a good crop in 2026-27 and production in South America suffers.
But before meteorology matters, make sure the Federal Reserve doesn’t throw a curveball Wednesday, Jan. 28, when the central bank puts out its first statement on monetary policy for 2026. The market believes there is a 97% chance the Fed makes no change to its target for short-term rates, leaving them in a range from 3.5% to 3.7%.