Is the Dollar Losing Its Safe-Haven Appeal? Big Banks Weigh In

Major financial institutions, including JPMorgan Chase and Deutsche Bank, are scrutinizing whether the U.S. dollar can sustain its global dominance.

A recent Reuters survey, which involved 69 foreign exchange strategists, revealed growing doubts about the dollar’s status as a reliable safe-haven asset, particularly during periods of market instability. Approximately one-third of those surveyed expressed uncertainty about the dollar’s resilience.

Among the participants who provided more detailed responses, 40% noted emerging signs that the dollar’s reputation as a safe haven could be weakening, with concerns that this trend may persist over an extended period.

George Saravelos, Deutsche Bank’s global head of FX research, suggested that the dollar’s safe-haven appeal might be diminishing due to two key factors: a weaker economic outlook for the U.S. and perceived instability within U.S. institutions. These developments, according to Saravelos, may reduce foreign investment in the dollar.

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On the other hand, Arindam Sandilya from JPMorgan emphasized that while dethroning the dollar as the primary reserve currency would be a lengthy process, the gradual decline in the dollar’s share of global reserves has been ongoing for decades. Central banks, Sandilya noted, have increasingly diversified their holdings, favoring gold as an alternative reserve asset.

In the context of this shift, gold has surged to an all-time high of $3,167, prompting bullish predictions from Wall Street. Bank of America recently projected that gold could reach $3,500 in the long term, while Citi indicated that a weaker-than-expected U.S. economic performance could push gold to the same level.

Alexander Stefanov