FXStreet reports that analysts at Natixis said that three mechanisms can be put forward to explain the lack of depreciation of the dollar.

“International bond capital is flowing into the United States, in significant quantities and sufficient to finance the US external deficit, while it is flowing out of the eurozone on average.”

“The faster recovery in activity in the US has led to expectations of a faster exit from expansionary monetary policy in the US than in the eurozone (stabilisation of the Fed balance sheet in 2022, rather than 2023 in the eurozone).”

“The faster growth in stock market indices in the US attracts international investors more to US equities than to European equities, which is obviously positive for the dollar.”

What would it take for the US external debt to lead to a depreciation of the USD?

“US external debt could lead to a depreciation of the dollar only if: The ECB announced an exit from its highly expansionary monetary policy; The European bond market became more attractive for non-residents.”