A collapse is when the value of the currency takes a dive and in this time of volatility in the market, the dollar could be a currency that could possibly plummet. Anyone who hold dollar-denominated assets will sell them at any cost. Those include foreign governments who own U.S. Treasuries. The possible collapse of dollar also affects foreign exchange and futures traders.
There are two conditions before the dollar is considered to be collapsing. The first is that the dollar must be seen in a weak state, this 2017 the U.S. currency is fundamentally weak despite the 25 percent increase. The second condition must be a viable currency alternative for everyone to buy. The Dollar’s strength is based on its use as the world’s reserve currency.
Altogether, foreign countries have accumulated more than $5 trillion in U.S. debt. Other major holders have started dumping these holdings of Treasury notes on the secondary market. This could cause a panic which would lead to a collapse. China owns $1 trillion in U.S. treasury. China pegs the yuan to the dollar because this keeps prices of its exports to the United States in low prices.
China and Japan are aware of the shaky position with its ties in the United States. In turn these two countries are selling more to other Asian countries that are gradually becoming more economically stable. Even in volatile times, the United States is still the best market in the world this is mainly the reason why countries like China and Japan are keep ties with the United States.
The collapse will not occur this year. In fact, the event of the dollar collapsing is highly unlikely because any of the other countries who are capable of making that happen like Japan and China does not and will not let the dollar collapse.