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TD Securities strategists Jayati Bharadwaj and Linda Cheng argue that the US Dollar could regain its role as a safe-haven asset amid current global shocks, despite structural challenges. They highlight that geopolitical tensions and economic uncertainties are creating conditions where investors might favor the USD over other currencies, even if its safe-haven status is no longer automatic. The analysis suggests that the USD's appeal stems from its dominance in global reserves and its role as a transactional currency, though factors like inflation and fiscal policy could temper this dynamic. For forex traders, this analysis underscores the USD's potential to outperform in volatile markets, particularly if risks escalate. The debate over its safe-haven status could influence cross-currency flows and hedging strategies. Central banks in emerging markets might also increase USD holdings to stabilize their reserves, indirectly supporting the dollar. Looking ahead, investors should monitor developments in global risk sentiment, central bank interventions, and the Federal Reserve's policy stance. If the USD solidifies its safe-haven role, it could pressure other major currencies like the EUR and JPY. However, prolonged economic stagnation or policy divergence might challenge this narrative.
