Ray Dalio says the U.S. had its 'Suez moment' — what a weaker U.S. dollar means for Canadian savers and snowbirds

For Canadians, it’s more than an interesting history lesson. The U.S. dollar’s share of global foreign exchange reserves has slipped to 56.9%, its lowest level since 1995 and down from a peak of 72% in 2001, according to the International Monetary Fund (IMF). That doesn’t mean the U.S. dollar is on the verge of collapse. It remains, by a wide margin, the world’s dominant reserve currency. But the long-term trend is important if you own U.S. investments, hold U.S. cash or expect to rely on U.S.-dollar income in retirement.

Here’s what Dalio is actually warning about, why the U.S. dollar’s dominance has been gradually eroding and what that could mean for Canadians.

What did Ray Dalio actually say?

Dalio has spent decades studying the rise and fall of reserve-currency powers over the past 500 years. In his latest essay, he draws a parallel between Britain’s failed handling of the 1956 Suez Crisis and the United States’ involvement in the 2026 Iran war.

Britain won the military battle but lost the confidence of its allies and creditors. That loss of confidence permanently weakened the British pound’s standing in the global financial system.

Dalio argues the United States faces a similar risk if global investors and foreign governments begin losing confidence in America’s finances. In that scenario, investors could reduce their holdings of U.S. government debt, putting downward pressure on the U.S. dollar. Dalio isn’t saying this outcome is certain, but he presents it as a possible predicament.

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Why is the U.S. dollar’s dominance being questioned right now?

Several long-term trends are coming together. First is the growing debt burden. As previously mentioned, U.S. national debt surpassed US$39 trillion in March 2026. Second is America’s credit history. All three major credit rating agencies have downgraded U.S. government debt at various points over the past 15 years: S&P in 2011, Fitch in 2023 and Moody’s in May 2025.

Third is the slow yet steady decline in the dollar’s role as the world’s reserve currency. Central banks now hold 56.9% of their foreign exchange reserves in U.S. dollars, down from more than 70% two decades ago.

The IMF notes that much of this decline is due to exchange-rate movements rather than central banks actively selling U.S. dollars. Still, a gradual erosion in reserve-currency status can eventually translate into a weaker and more volatile U.S. dollar. If and when that happens, Canadian investors may begin to feel the effects.

What does this mean for the loonie?

The Bank of Canada held its key interest rate at 2.25% on July 15, 2026, while pointing to the gap between U.S. and Canadian bond yields as one factor weighing on the Canadian dollar. A weaker loonie has both winners and losers. It helps make Canadian exports more competitive, but it also raises the cost of anything Canadians buy in U.S. dollars.

That includes everything from snowbirds paying U.S. property taxes and health insurance to investors using Canadian dollars to purchase U.S.-listed stocks. The USD/CAD currency pair has moved several cents in recent weeks. These fluctuations can be costly if you’re managing a large retirement portfolio or several months of living expenses in the U.S.

Should Canadian investors adjust their U.S. dollar exposure?

There’s no one-size-fits-all answer. According to guidance on hedged versus unhedged ETFs from the Nova Scotia Securities Commission, the right approach depends largely on your investment timeline and your tolerance for currency risk.

For example, currency-hedged funds use derivatives to reduce the impact of exchange-rate fluctuations, allowing returns to more closely reflect the performance of the underlying U.S. investments. Unhedged funds, on the other hand, allow currency movements to affect returns. If the Canadian dollar strengthens, those currency movements become a headwind. If the loonie weakens further, they can provide an additional tailwind.