In recent months, a surprising market trend has emerged: growing geopolitical uncertainty is no longer accompanied by a strengthening of the U.S. dollar—a pattern that has traditionally held true. Quite the opposite, in fact—the dollar is weakening. This could indicate that the USD is no longer viewed as a classic “safe haven” currency.
It’s important to remember that a safe haven asset is not defined solely by economic fundamentals. Its status also depends on a shared belief among market participants that the asset will provide stability when others falter. If investors begin to doubt this consensus, the resulting loss of confidence can trigger a self-reinforcing cycle—leading to further weakening of the dollar.
This isn’t yet the base-case scenario, but it is worth monitoring. Especially given that just yesterday, the dollar depreciated again—despite a rise in U.S. Treasury yields. Investors are demanding a higher risk premium. Concerns about the future of U.S. public finances are intensifying.
It’s difficult to treat the dollar as a genuine “safe haven” while the U.S. Congress is simultaneously working on a tax bill expected to raise the deficit by $3 trillion—and as credit rating agencies (specifically Moody’s) are downgrading the country’s creditworthiness.
Meanwhile, speculation around a potential currency agreement—referred to in media as the “Mar-a-Lago accord”—is fading. This interpretation is supported by the outcomes of a recent meeting between Scott Bessent and Japanese Finance Minister Shunichi Kato. While rumors had suggested the talks might focus on exchange rate interventions, the official statement emphasized that both the U.S. and Japan support market-driven exchange rates, and that current valuations reflect underlying economic fundamentals.
Author: Łukasz Zembik, OANDA TMS Brokers
Source: ManagerPlus.pl – “Dolar przestaje być bezpieczną przystanią”
