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If the Strait of Hormuz reopens, global buyers would unload US dollars once needed for oil, driving the dollar down by as much as 7% and raising import costs. At the same time, investors are bypassing US Treasuries via FX swaps and issuing foreign-currency bonds, eroding the dollar’s unique “convenience” premium.
- If the Strait of Hormuz reopens, fading demand for dollars to buy oil could push the DXY toward 91, making imports roughly 7% pricier.
- Treasury bonds have lost their unique "convenience premium" since 2008, as investors now replicate dollar exposure via FX swaps instead of buying Treasuries.
- U.S. companies like Apple, Amazon, and Google are issuing foreign-currency bonds (euro, pound) because they can't compete with Treasury yields, signaling weakening dollar/Treasury demand.
- A reopened Hormuz could act as the trigger that finally lets the dollar's value fall in line with declining Treasury yields.