THE MACRO SENTINEL Free Global Macro Dashboard · regime-aware research

Dollar System

Pillar 5 — the dollar's reserve role. Three composites read one question three ways: how strong is the dollar's global franchise (DHI), how much room does the sovereign have before its debt service consumes its fiscal policy (FDI), and is the offshore plumbing that makes USD the funding currency of the world calm or stressed (EDP). Updated .
Each sub-index is equal-weighted, walk-forward z-scored (expanding window, ±4σ winsor). Regime bands read off expanding-window percentile rank. Drill down to each sub-index below.

Dollar Hegemony (DHI)

Implication:

Component contributions

Three components: trade-weighted USD (DTWEXBGS), real effective exchange rate (RBUSBIS), foreign-held UST share (FDHBFIN / GFDEBTN). Each sign-adjusted so positive = stronger hegemony. Composite = equal-weight mean of the three component z-scores where defined.

Fiscal Dominance (FDI)

Implication:

Component contributions

Three components: net-interest / GDP (A091RC1Q027SBEA / GDP), federal debt / GDP (GFDEGDQ188S), and the refinance wedge (10Y yield − effective coupon on outstanding marketable debt). Quarterly sources forward-filled to month-end, ALFRED first-release vintages where available.

Credit-cycle context: FDI measures the public-credit side of the fiscal-dominance trade. The private-credit side — credit-to-GDP gaps, equity multiple expansion, margin debt, spread compression — sits on the Credit-Cycle Melt-Up Monitor, which includes a 5-lens composite index (CCMI) calibrated against forward 12m equity returns.

Eurodollar Plumbing (EDP)

Implication:

Component contributions

Four components: 3M CP − 3M T-Bill (unsecured funding premium), SOFR − EFFR (repo-collateral stress), 3M T-Bill − SOFR inverted (flight-to-bills), and HY OAS (credit-contagion tape). History begins April 2018 when SOFR went live. Positive = tighter plumbing.

Sovereign vs private — the foreign UST holder shift

The single chart that reads the Dollar System repricing in plain data. US Treasury TIC publishes monthly foreign UST holdings split into Official (sovereign reserve managers, central banks, sovereign wealth funds) and Private (private investors, hedge funds, pensions). The official share peaked at % in and has steadily declined to % today.

Read: sovereigns once held 3 of every 4 dollars of foreign UST; today they hold under half. The marginal price-setter for US Treasuries has shifted from foreign central banks to private investors over 17 years. That's the Dollar System's locality fracture making itself visible in price-discovery.
· Source: .

Methodology

The three sub-indices read one question three different ways. Reserve-currency status is not a single number. The trade-weighted franchise (DHI) moves with flow demand; the fiscal latitude the sovereign retains to defend it (FDI) moves with interest-cost dynamics; the offshore funding plumbing (EDP) moves with collateral and unsecured-funding stress. When all three read elevated together, the dollar is structurally strong but the system is tight — the setup for a funding-led dollar squeeze. When DHI softens while FDI and EDP stay elevated, it's a policy-driven step-down in the franchise without an attendant accident.

Shared z-score convention. Each component is standardized on an expanding window (min 24–36 monthly observations) and winsorized at ±4σ. Sign-adjusted so positive reads mean "more of what the index is measuring." Composites are equal-weighted means of available components at each date; no curve-fit weights. Percentile ranks are computed on the expanding composite history and drive the regime labels.

Regime bands (all three sub-indices).

Canon

Farhi & Maggiori (2018, QJE) — theory of reserve-currency equilibrium that DHI benchmarks against; Reis (2013, AEJ:Macro), Sargent & Wallace (1981, FRB Mpls QR) — fiscal-dominance mechanics underlying FDI; Bindseil (2016), Avdjiev, McCauley & Shin (2016, Economic Policy) — offshore-dollar plumbing and Eurodollar-market structure for EDP.

Cross-country complement

The three Dollar System sub-indices are US-centric by construction. The cross-country counterpart — IMF COFER reserve currency composition, BIS bank-claims and credit-gap dispersion, country-level GDP and reserves trajectories — is on the Multi-Polar World research page. Together, the pillar measures the dollar system's internal state (US fiscal latitude + funding plumbing); the multi-polar page measures its external state (allocation drift across reserves and bank flows).

Inputs: FRED (DTWEXBGS, RBUSBIS, FDHBFIN, GFDEBTN, A091RC1Q027SBEA, GFDEGDQ188S, GDP, DGS10, DCPN3M, DTB3, SOFR, EFFR, BAMLH0A0HYM2). Nightly rebuild. See the methodology index for the full indicator manifest.