John Croteau (2:03)

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Ann Berry (2:17)

My conversation with Kathy Lean, Director of FX Strategy at BK Asset Management.

Ann Berry (2:23)

Kathy Lean, Foreign EXCHANGE Guru Very, very excited to have you on, and here's why. Other than the fact that you're so energetic and you're, you're so enthusiastic about talking about foreign exchange, which there aren't many voices out there, quite frankly, who can deliver this in quite the way that you can. But the headline has been that the US Dollar has weakened and that it's recently sunk to its lowest level in four years. And the big question for you, Kathy, is why do people care and what's driving it? But let's start with why do people care if the dollar is weaker today?

Kathy Lean (2:56)

I actually think that most Americans understand the importance of the dollar. Maybe not in the way, of course I do because I'm deep into it. But it impacts, you know, where you decide to travel, whether you decide to stay domestic or not. It impacts, you know, what you're ordering from TEMU or anything else. It impacts, you know, the price of oil and gas that you're paying at the pump. It impacts so many different things. And it also impact investments and whether the companies that you're investing in are earning more or less, depending upon whether it's a domestic or an international business. So it is very important. So even though you may not be investing in the dollar right now, it's very important to watch.

Ann Berry (3:34)

And so talk to us about why it has weakened.

Kathy Lean (3:37)

Right?

Ann Berry (3:38)

What, what is it that typically drives demand and supply for the US Dollar? And why is it hitting the low that it is right now?

Kathy Lean (3:45)

That's a very good question, Ann. So first off, like you said, the US Dollar has fallen to its lowest level, and a lot of that has to do with interest rates. The number one most important thing to understand about the US Dollar is it's driven by the direction of interest rates. And the Federal Reserve, you know, they're in the course to cut interest rates. But it's not just what US Interest rates are. It's where US Interest rates are compared to the rest of the world. So many other central banks are done, whereas the Federal Reserve could end up being one of the very few central banks that are lowering interest rates in 2026. So because of that, the US dollar is falling because it's an expectations kind of game. But that's not the only thing that drives the dollar. The dollar is also affected by confidence, confidence that foreign investors have in the US Economy, US Policies. And, you know, there's a lot of different reasons why, you know, investors abroad are kind of shunning US Assets Right now.

Ann Berry (4:43)

Well, let's talk about those, because if we do a little bit of pattern tracking through the most recent declines in the US Dollar, we saw the US Dollar drop in the weeks Immigration Day tariffs were announced. We saw the dollar drop in response to the Greenland situation. Talk to us about the capital flows that happen in the wake of those kinds of announcements and how that translates into those dollar reductions.

Kathy Lean (5:07)

You know, that's a very interesting question that you asked because it's actually confusing to a lot of people because you would think that liberation tariffs, you know, negatively impacting risk sentiment in the markets, confidence, Greenland, you know, all of these geopolitical problems should be driving investors into the SAF of the US Dollar because the dollar itself is supposed to be the quintessential safest place to park your money. But that has not been the case. Like you said, during Liberation Day, instead of rising, the dollar fell. When we hear these tariffs announcements, instead of rising, it falls. And with the Greenland and other kind of political issues, and the reason for that is because I think a lot of foreign investors are kind of concerned about the uncertainty. And so they're looking to park their money, which traditionally has been in the US Dollar, in other assets like gold. And this includes individual investors like you and I, all the way up to big central banks and institutional investors. In fact, the numbers show that central banks now hold, for the first time ever, more gold than they do US Treasuries and US Dollars. And that's a pretty big deal. And it shows that, you know, that the US Dollar is being punished for being the source of the troubles rather than the past. It used to be the source of safety in times of trouble.

Ann Berry (6:29)

And talk about Kathy, just sort of related to that, there's a demand for actually the dollar, the currency, and then there's demand for U.S. government debt. Right. U.S. treasuries, which in turn, just to follow the money a bit, just for the audience, if I wanted to go buy a US treasury and I live overseas, I have to buy a US Dollar in order to go buy that US treasury, right? So the demand for one's linked. What have you seen in terms of demand for U.S. treasuries from overseas investors? Do people still want to buy US Debt or are they worried about the size of things like our fiscal deficit?

Kathy Lean (7:01)

Well, the US Bond market is still the largest bond market in the world. So if you have large money, like, you know, central bank money, hedge fund money, institutional money, there are only limited places that you can park it. So US Debt and US Dollars will still be in demand. But the numbers show that, you know, investors are not buying as much as they have in the past. And one of the interesting things that is happening in the markets right now is how the US Bond prices are falling, leading to a sharp rise in U.S. yields or bond yields. So typically for those people that don't know the US Dollar, it usually moves in lockstep with treasury yields. Because if yields are going up, you would imagine that more foreign investors, domestic investors, are bringing their money here in the US and they're parking it in dollars. But that's not happening right now. You're seeing yields rise and you're seeing the dollar fall. And the reason for that is because yields are rising, because people abroad are selling US Bonds and that's driving yields higher. So it's happening for the wrong reasons and therefore hurting the US Dollar as a result.

Ann Berry (8:03)

It's the reason for these moves, Kathy, and the reason that the traditional correlations on indicating what they used to that I think makes this so fascina of the things that is a natural extension of all of this happening is it's the why should investors care?

Ann Berry (8:20)

Right?

Ann Berry (8:20)

So if the underlying factor is something that should be troubling, which you've sort of described, investors should care about that underlying dynamic. But in terms of the dollar falling more broadly, why should investors care? Does it impact, you know, it impacts inflation. We personally, it impacts the expense of our overseas holidays. But talk us through why it is at a weak US Dollar really is a shift for investors and why it matters to them.

Kathy Lean (8:44)

I mean, it matters in so many different ways, like you're touching on, you know, number one, it matters in terms of inflation. Generally speaking, when you have a weaker dollar, it drives up inflation and therefore makes it more difficult for the central bank to lower interest rates, which is what is really needed in order to sustain growth. At the same time, it also impacts growth. Now, one of the main reasons why President Trump came out and said that, you know, he wouldn't mind a weaker dollar is because it boosts exports and it's good for the markets. And it also in some ways bo the stock market in general and keeps it afloat. Because if you think about it, when you have a cheaper dollar, US Goods are far less expensive for foreign consumers, foreign businesses. So there may be more M and A transactions. All this stuff is good for the markets. And then for us as everyday people, it also impacts the cost of gas because oil is priced in dollars. It also impacts things like metals that, you know, gold that have gold and silver in it, electronic equipment, medical equipment that use gold and silver because that also is affected the price of the US Dollar. And then of course, you know, selfishly, our travel plans as well. So it definitely affects a lot of different things. You're also maybe going to see foreign made cars more expensive foreign made. If you want to buy that Sony TV or you know, that PlayStation, it could increase in price. And although some of these companies have the factories here in the US are slightly different. But that's what I'm trying to tell you, which is that, you know, does affect all Americans.

Ann Berry (10:18)

It also affects a lot of international nations that hold U.S. assets. Kathy and I just found some really interesting numbers that look at the largest holders of foreign exchange reserves. And this was as of 2025, China held 3, $3.5 trillion on of dollar denominated assets such as treasury bonds. Japan $1.2 trillion. United States held 910 billion. Of itself, Switzerland 909 billion. Now, when the dollar falls, that leads to a decline in the value of those holdings. So China's three and a half trillion dollars is now basically worth less. What does that mean in terms of how those nations think about which kinds of assets they may want to hold in future?

Kathy Lean (11:03)

Well, I don't think that. I think that they're not buying as much US Assets for very, for very different and fundamental reasons. But the way it matters to them most immediately is it makes the cost of servicing debt in their current currency terms cheaper. And so it's less of a strain for them. And I think that's the primary benefit from their perspective. Now your question is, will they buy more US Treasuries as a result? I think they're not buying it for specific reasons because they want to diversify out of US Assets. I do think that perhaps it does give them make it more challenging to perhaps buy more gold or to buy more euros, things like that. So they may look at it from different perspectives, but on the most foundational basis it makes the cost of servicing all of these bonds, U.S. bonds that they hold, cheaper.

Ann Berry (11:54)

Let's take a quick break and when we come back, more of my conversation with Kathie Lee.

Ann Berry (11:59)

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John Croteau (12:01)

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Ann Berry (12:04)

Oh yeah, well, would you trust a matchmaker who uses AI to comb through a database of people who meet all of your criteria?

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Ann Berry (12:12)

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John Croteau (12:22)

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Ann Berry (12:28)

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Ann Berry (12:38)

Morning brew and now back to my conversation with Kathy Lean, Director of FX Strategy at BK Asset Management.

Ann Berry (12:46)

So where, where are folks like that putting their money if, if the US assets aren't as in much demand as they used to be? Is it going to the euro? Is it going to the pound? Where are investors parking their investments rather than in US dollar denominated assets?

Kathy Lean (13:00)

It's in gold, it's in the metals. That's why we're seeing this tremendous move in gold and silver. And even when we had some news that should have driven gold and silver back, we have not seen, well, we're beginning to see a correction, but we haven't necessarily seen the downtrend broken period. And I think, you know, gold is, the metals are definitely benefiting, but the metals are getting very overextended. Euro and you know, German bonds, things like that is also benefiting, but the market for appetite is smaller than US Bonds and as a result they can't really go away from it. So it's a tough situation.

Ann Berry (13:36)

We had Danielle DiMartino Booth here on the show last year and she talks a lot about Fed policy. And as part of that conversation we touched on what was going on with gold, Kathy, and she said, look, she said, and gold's a meme stock at this point. What you're describing is not meme stock behavior. What you're describing is gold fundamentally being in more demand. So is that what you believe? Do you believe that gold is just fundamentally more in demand and so this has been a rational increases price or do you think there's a meme stock element to it at this point?

Kathy Lean (14:05)

I think for speculators there could be a meme stock element, but the big money that's going in, as the numbers show, is not speculative money. I mean a good part of it is, but also central bank money is going into gold as well. And so they don't look at it from a mean stock perspective, but the speculators are jumping on board, which is why you're seeing such violent corrections, because you're seeing Liquidation by speculators faster, which I think a lot of these central banks are going to see as an opportunity to buy at lower levels. Now, one of the other, just to bring in one more thing. I think a lot of institutional investors are also buying stocks, global stocks, US Maybe not so much US Stocks, but there's still looking at this was to be this year was a good year for earnings growth. And so and there's a lot of opportunity with the productivity boom, the AI boom, things like that. So there's still upside opportunity in US Stocks. There's definitely a lot of upside opportunity in emerging market and global stocks. So I think a lot of the institutional money is going into those marketplaces.

Ann Berry (15:01)

And how much of a shift is that then, Kathy? This appetite for stocks versus less risky assets?

Kathy Lean (15:07)

I think that, you know, we're seeing more of a shift because investors are not necessarily looking at US Bonds as the best option. Especially with US Interest rates looking to move to lower levels due to one or two interest rate cuts from the Federal Reserve this year. They're definitely looking for more opportunity abroad.

Ann Berry (15:24)

So when we saw the news come out that Kevin Walsh, right, is President Trump's pick to be the next Fed chair, we what reaction did you see to that in the currency markets? Did you see traders vote with their money and say, okay, we're expecting something different here?

Kathy Lean (15:41)

So yes, we did see the US Dollar rise. We saw gold get crushed on the back of the move. So investors did, did respond positively in terms of the US Dollar after, you know, Wash was chosen as the nominee. He was in many ways the safest choice for the markets because he's got deep Fed experience, he's probably going to be approved easily, but for the US Dollar. The reason why this is important is because many people perceive Kevin Walsh as an inflation hawk and that he's been more reluctant to cut interest rates. He's been more worried about inflation. But I think that that sentiment has shifted and I think that people do not realize that more recently his comments are less sure that he may be a hawk turned dove, that he may not be as hawkish and he may actually deliver the one to maybe even more interest rate cuts this year. And the reason for that is because based upon his language, he's been very positive on AI, he's been very positive on productivity and all of that could bring inflation lower and sustain growth. And so I think, you know, overall he may not end up being as dovish as the market believes, but he is probably the least dovish still of the potential nominees that, that we had learned about before Wash was chosen.

Ann Berry (17:02)

Yeah, Just put that in context. You know, the White House has been super clear that it wants to see interest rates come down.

Ann Berry (17:07)

Right.

Ann Berry (17:07)

And it's actually said that the cost of servicing debt for the nation is too high. And it wants to see also the housing market stimulated by seeing interest rates come down. So the idea that President Trump would nominate somebody or put up for nomination, someone who didn't share that point of view, I've got to believe, as it was pretty unlikely.

Kathy Lean (17:23)

You know, what's really interesting is that Pat Howell and Walsh were basically his two picks during his first.

Ann Berry (17:29)

Yeah, that's right.

Kathy Lean (17:29)

Not many people remember this. Not many people were in the markets at this time. So they think that this name is completely new. But he had to. He had to choose from one or two. He probably. He definitely regretted his choice, but I think that, you know, he put a lot of thought into it the first time around and that he had vetted him and he had gone back to what he thought would hopefully be right for the markets and right for the economy.

Ann Berry (17:52)

Can we talk about how the US Dollar, the strength or the weakness of it, has become sort of emblematic of the strength of the United States generally?

Ann Berry (18:01)

Right.

Ann Berry (18:01)

It's such. I mean, it's too rough and ready as a comparison. But you said earlier, which is true, that the US Dollar has been the reserve, the world's reserve currency base, going back now nearly 100 years.

Kathy Lean (18:12)

Right.

Ann Berry (18:13)

Why does that matter? Why does it matter for the US for our currency, the US Currency, to be the world's reserve?

Kathy Lean (18:20)

Well, it matters because, you know, first of all, it's a sign of power. It's a reflection of the breadth of the US Markets and the, I guess, its ability to attract foreign investment. It's a representation of the strength of the country and the nation and the demand for it. Yes, the demand for us, period. But it also comes with risk. And we saw that in the headlines recently where Trump, you know, when he was having his tiff with the EU over Greenland, he said, if Europe decides to sell U.S. bonds and U.S. treasuries, there's going to be severe consequences. And that is the risk of having everyone own so much U.S. treasuries, which is that if they decide one day that for whatever reason they will, they want to sell US Treasuries, what that's going to do is, you know, first of all, drive the US Dollar lower, but most importantly, drive US treasury yields higher, which means your credit card bills, your home loans, and you know, many things that are affecting your everyday life, your life, as well as the cost of businesses for American companies are all going to go up. So that in and of itself could crash the US stock market and hurt Americans in a very severe way. Now of course these countries know that they did that, that would hurt their own economies and their own markets as well. So, you know, it's a high bar for them to do so, but it is leverage that they have.

Ann Berry (19:44)

So if not the US Dollar, who is it, Kathy? Is it the Chinese renminbi?

John Croteau (19:49)

Who?

Ann Berry (19:49)

What becomes the alternative to the US Dollar as the reserve currency of the world?

Kathy Lean (19:53)

I think, you know, the only legitimate alternative is the euro because the reserve, the Chinese yuan is still controlled and so it's not as open as the other currencies. Gold, you know, is all over the place and extraordinarily volatile. Euro has long been the second reserve currency of the world. It's got limited capacity in terms of the bond market. But I think, you know, that is part of the reason why the euro hasn't fallen, has, you know, is more resilient than the other currencies because it is considered, you know, the second reserve currency.

Ann Berry (20:29)

Can we switch gears a bit but just talk about something and take the opportunity for you to break down a topic, Kathy, that has been in the headlines but I think for a lot of people could feel a little bit amorphous, which is the importance of Japan in all of this. Talk to us about why Japan is so important when it comes to foreign exchange markets and the dollar level.

Kathy Lean (20:48)

Well, the Japanese markets are huge. First of all, you know, Tokyo is one of the biggest foreign exchange trading centers in the world and Japan owns a tremendous amount of U.S. treasuries. But the reason why Japan is kind of in the headlines recently is twofold. You know, number one, the Japanese yen has fallen significantly in value to tempting the the or requiring the Japanese to consider intervening in its currency. And this is something that many people in the market these days have not seen before bank of Japan or Ministry of Finance intervention, they don't really understand what that means because the impact that has in the rest of the market can be quite significant. So what this means is that when, you know, sometimes, you know, when the currency gets too weak or too strong, you know, there are negative consequences and no country or, or wants their currency to be too weak or too strong. In the case of Japan right now, their currency is very weak. Now normally Japan's an export dependent economy, so they want a weak currency. But the problem with the weak currency is that, you know, it also, you know, hurts. It also, you know, basically hurts their ability to, you know, buy abroad. It also hurts, you know, impacts inflation, things like that. So it becomes more problematic. So recently we've seen that the Japanese have been trying to talk down their currency, trying to use words saying that we will threaten to intervene, you know, things like that. But the market is smarter than that. They know that verbal intervention doesn't work. And history shows that. History shows that the only time intervention works is when it's coordinated with the U.S. and so, you know, recently we had the Federal Reserve basically check rates, which means that they said that's not abnormal. It's very normal for them to check where currency levels are, to call the different banks and check where the levels are. But this time they said they were checking it on behalf of the Treasury. Now, none of this is a mistake. All of this is well played. And so basically, by saying that they're checking for the treasury, it's suggesting to the market that they could potentially come in and sell the US Dollar and, you know, alongside Japan, in order to prop up the value of the Japanese yen and make sure that the US.

Ann Berry (22:55)

Dollar doesn't get too weak in comparison. Too strong, excuse me, too strong in comparison to Japan.

Kathy Lean (23:01)

You're absolutely right. And now it didn't happen yet that rate checking did not turn into actual selling. But that was also, you know, followed by then the, you know, a lot of reporters asking Trump whether, you know, how he feels about the dollar. So if there was intervention, it would be significant because, you know, if they came in to sell US Dollars, you see ripple effects across the stock market, you see ripple effects across the various financial markets. Volatility in the Forex market would skyrocket. But I think that, you know, I think that, you know, the US Will also see that's a high bar for them to come into the markets. I think they're testing the waters to see whether or not verbal intervention is sufficient.

Ann Berry (23:44)

So, Kathy, you are. You have eyes on the market all day, every day. And you are. You talk about it a lot. I see you on CNBC a lot. Fantastic that you're here. Where are you putting your money right now? If I were to look into the Kathy Lean brokerage account, what would I see in terms of where you've been investing?

Kathy Lean (24:03)

Well, you know, right now I'm still in long stocks. I still think the market is, you know, at the end of next year going to be higher than where it is this year. I think stocks, you Know, trying to look for opportunities to buy stocks at lower levels is good. I think also, you know, gold, you know, we're seeing some dips. I'm looking for opportunities to buy. I'm also kind of interested in bitcoin right now. Talk about that.

Ann Berry (24:23)

Yeah, talk about that.

Kathy Lean (24:24)

Because we've had a very steep decline in bitcoin. And Kevin Walsh, he is famously known for saying that if you are, you know, under 40, Bitcoin is your new gold. And that, you know, I think between that and the crypto bill and between the opportunities that that could bring for the market, that this recent steep drop that we've seen in bitcoin is starting to become a very interesting opportunity to start to buy in at lower levels. So I'm looking at, you know, that market and then also in terms of the forex market, I think, you know, the dollar is headed lower this year, more so than where it is right now. I like the euro. There's a lot of growth story in the euro area. I think also with the trade deals that they are engaging with with China, I think that's also going to bring, you know, opportunity for, for the region as a whole. So I'm very bullish Euros as a result.

Ann Berry (25:17)

And is there anything that you're not touching? There's a complete no fly zone for you from an investor standpoint right now.

Kathy Lean (25:23)

Well, you know, I've, I think, you know, oil is a little tricky. I think oil is very temperamental and very headline driven. And so while there seems to be some recent big moves in oil, that's something that, you know, I'm going to stay away from for now.

Ann Berry (25:40)

Kathy, we want to keep following you. We want to get more of your insights. So tell us where to find. You've written a couple of books, so talk a bit about where Kathie Lean can be found.

Kathy Lean (25:48)

Okay, so, you know, you're right. I have a couple of books. Little book of Currency Trading Day Trading and Currency Market. I just put out an interview book called Prop Trading Secrets and then I also have a book called Millionaire Traders. But you can follow me. The best place to follow me is on X. My handle is Kathy LeanFX. I'm also known as the Forex Macro Queen on Instagram. So you can follow me there. And I have a YouTube channel, bk4x.

Ann Berry (26:14)

Kathy Lean, brilliant energy, great conversation. Thank you. Will you please come back because I feel as though there's so much more to discuss.

Kathy Lean (26:20)

It would be my pleasure and I would love to, you know, if the markets are rocking I'm happy to be talking.

Ann Berry (26:26)

Huge thanks to Kathy Lean for joining us. What a fun conversation about everything that's driving the US Dollar right now. Tons of energy.

Ann Berry (26:35)

We'd love to have Kathy back.

Ann Berry (26:36)

Well, the markets are wrapping up for the day. John, did anything catch your eye this week?

John Croteau (26:40)

Well, listening to Kathy talk about the tremendous run of gold and silver. And by the way, gold was up again today, just shy of $5,000 an ounce. Got me thinking about the Olympics kicking off. And more than 700 medals will be presented over the next few weeks, not including sentimental value. Since 2024, the gold medals have doubled in value. They're now worth about $2,300 each. And the silver medals have tripled in value to about 1400.

Ann Berry (27:06)

Well, that's it, folks, for today's Brew Markets Daily. Have a fantastic weekend.

John Croteau (27:10)

Brew Markets Daily is hosted by Anne Barry and produced by John Croteau, Targa Delatif and Emily Millern. Our Tentacle director is Lonnie Fiskis. Jim Orzo is our audio engineer, guest booking by A.B. silver and the president of Morning Brew, Inc. Is Devin Emery. If you have any feedback or a company you'd like us to COVID leave a comment or send an email to BrewMarketShoworning Broadcom.

Ann Berry (27:28)

Wake up on Monday with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew Daily. We'll see you back here on Monday, same time, same place.