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DBS Group Research economist Philip Wee highlights that the US Dollar's traditional role as a safe-haven asset is weakening despite rising oil prices and geopolitical tensions. Typically, the USD benefits from risk-off sentiment during crises, but recent market dynamics have shown a divergence. Factors such as the US Federal Reserve's accommodative monetary policy and the dollar's underperformance against other major currencies like the euro and yen have contributed to this shift. Additionally, investors are increasingly favoring alternative safe-haven assets such as gold and Swiss francs over the dollar. This development has significant implications for global markets. Traders must reassess USD-based hedging strategies and portfolio allocations, as the dollar's reliability as a safe-haven is no longer guaranteed. The shift could also impact commodity markets, particularly oil, which is priced in USD. A weaker dollar might boost demand for oil, creating a feedback loop that further pressures the currency. Central banks and policymakers may need to adjust their interventions to stabilize the dollar's role in the global financial system. Looking ahead, investors should monitor key economic indicators such as US inflation data, Fed policy decisions, and geopolitical developments in the Middle East. The interplay between these factors will determine whether the dollar regains its safe-haven status or continues to lose ground to other assets. For Gulf investors, the evolving dynamics underscore the importance of diversifying into non-dollar assets and hedging against currency volatility.
