USD: Rabobank confirms its safe haven position

The Dollar’s Safe Haven Status Reinforced Amid Global Uncertainty

Rabobank’s FX Strategy team notes that recent turmoil in the Middle East and resulting market volatility have reaffirmed the US Dollar’s reputation as a safe haven asset. The bank emphasizes the Dollar’s leading role in global foreign exchange transactions and reserves, suggesting that concerns about a long-term decline in the currency are diminishing, making investors more comfortable with holding long Dollar positions.

Liquidity and Market Flows Support Dollar Strength

“The events of the past two weeks have settled last year’s debate over whether the Dollar had lost its safe haven appeal following the sharp drop in April 2025, which was triggered by US tariff policy changes. We have consistently maintained that the Dollar’s unparalleled liquidity secures its status as a safe haven. In times of crisis, investors prioritize liquidity over potential returns.”

“According to the most recent triennial FX survey by the BIS, the Dollar was involved in 89.2% of all currency trades—an increase from previous years and far surpassing any other currency. This underscores the Dollar’s central role in global transactions, payment systems, and supply chains.”

“The Dollar remained relatively steady in the second half of last year. Now that its safe haven credentials have been reaffirmed, we anticipate that concerns over a prolonged decline will ease, potentially reducing the market’s hesitation to take long positions in the Dollar.”

“Looking ahead, the Dollar still faces challenges this year, particularly regarding how the Federal Reserve will balance political calls for monetary easing with inflationary pressures stemming from disruptions like the closure of the Strait of Hormuz. Globally, increased costs for energy and fertilizers are expected to affect various segments of the supply chain, including distribution and processing.”

(This article was produced with assistance from an AI tool and subsequently reviewed by an editor.)