LONDON, Feb 23 (Reuters) – The dollar has lost some, but not all, of its safe-haven value since 2024, ING said in note on Monday, adding however, that it saw no broad deterioration in global demand for the US currency.
The dollar index shed almost 10% of its value last year, in its worst annual performance since 2017. Erratic U.S. trade policy, U.S. President Donald Trump’s tariff threats towards allies and attacks on the Federal Reserve have weighed on the currency.
ING said in its report:
* The dollar has lost a chunk of its safe-haven value compared to 2024, when measured by calculating the three-month correlation between the dollar index and U.S. stocks and 10-year Treasuries.
* Private investors, who hold more than 80% of foreign holdings of U.S. assets, remain invested.
* Dollar weakness, at this stage, appears more cyclical than structural.
* There are no signs yet of an acceleration in de-dollarisation, when examining the use of the dollar in global assets, liabilities, market turnover and transactions.
* Fed independence is the cornerstone of global financial stability and if the U.S. central bank were to be seen cutting rates inappropriately, “a run on the dollar” could follow.
* Fall in dollar this year unlikely to match last year’s. ING sees euro ending year at $1.22, versus current levels around $1.18
(Reporting by Dhara Ranasinghe; Editing by Amanda Cooper)
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