A top Australian central banker said on Friday that the days of U.S. "exorbitant privilege" may be coming to an end, but the dollar's safe-haven rally this week after the Middle East war suggests any change will be glacial. Speaking at a policy forum in New York, Reserve Bank of Australia Deputy Governor Andrew Hauser said there was little sign yet of a persistent decline in the perceived security of the United States, even though the greenback did fall during market volatility over U.S. trade policy last year. The Reuters Iran Briefing newsletter keeps you informed with the latest developments and analysis of the Iran war. Sign up here. Advertisement · Scroll to continue
"While the events of 2025 could be a sign that things have changed, what we saw was far from unique. It is surely noteworthy that the dollar did appreciate following the recent attacks on Iran," said Hauser. "In truth, the dollar has never been a perfect hedge for all risk-off events, appreciating most persistently during periods of funding stress associated with strong demand for the currency." He added foreigners remained large buyers of U.S. assets despite media stories and commentary about investors withdrawing from the U.S. to seek alternative assets elsewhere including in Australia, noting that capital flows into Australia have remained broadly in line with previous years. Advertisement · Scroll to continue
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However, there has been an important change, Hauser noted, as the pickup in capital flows into the United States over the past year reflects buying of equity rather than debt. He said that suggests the possibility of a move away from the world of "exorbitant privilege" that has allowed the U.S. to borrow as much as it wants because the dollar is the global reserve currency.
