US President Donald Trump will address the Economic Club of New York later today. Attendees and global investors alike will eagerly await any mention of tariff policy or China trade negotiations. Both have come to dominate risk sentiment in recent weeks, overshadowing another perennial irritant for the US President, a strong US dollar.

In broad terms, the US currency has been on a rising trend over the last decade. The dollar index currently trades around 36% higher than its 2008 low.

Greenback strength in part reflects its global dominance. A recent Bank for International Settlements (BIS) survey showed that daily trading in FX markets reached an equivalent of USD 6.6trn earlier this year; of that sum, USD 5.8trn involved the US dollar. It is further amplified by the scale of the US equity and bond markets. Last year the US accounted for around 40% of equity market capitalization and outstanding issuance in bond markets globally.

But the US dollar’s central role is not written in stone, and we have identified a number of long-term dynamics worth monitoring:

* US economic and foreign policy. Rising US public debt and more populist policies have fueled concerns over the US fiscal outlook. The national debt has grown 16% under the current US administration to USD 23trn, and the next presidential term could usher in another significant round of government spending. In addition, the current White House has levied tariffs and imposed financial sanctions more widely and stringently than previous administrations, and often with a political lens. This has disrupted the established international status quo in certain areas, raising concerns abroad about the risks of US dollar dependence.

* The shifting world economic order. The global financial and trade system is increasingly complex, with diverging national interests. As the center of global economic growth shifts from West to East it is pulling some countries away from the established multilateral system. China's rising economic, technological and geopolitical clout is creating an increasingly bipolar world order, and the Chinese renminbi has the biggest potential to play a more important role as a global currency in the long term.

* A more balanced global system. Substituting for the dominant US dollar with another single currency may not be the optimal solution for a multi-polar world. Bank of England Governor Mark Carney said earlier this year, "When change comes, it shouldn’t be to swap one currency hegemon for another… We would do well to think through every opportunity, including those presented by new technologies, to create a more balanced and effective system."

So while the US dollar will likely maintain a dominant role, and indeed could benefit from near-term uncertainty, we could see a gradual transition away from it. And though the shift may appear far away on the horizon, we view structural changes in this market as too important to ignore for anyone who invests or does business internationally. Read more in the full UBS report, “The role of currencies in a shifting world order”.