ING Report: The Safe-Haven Attribute of the US Dollar Has Weakened, But Global Demand Has Not Broadly Deteriorated

ING Group stated in a report on Monday that since 2024, the safe-haven attribute of the US dollar has weakened, but it has not been completely lost. The report also noted that there is no widespread deterioration in global demand for the dollar.

The US dollar index fell nearly 10% last year, marking its worst annual performance since 2017. The dollar has been under pressure due to the erratic nature of US trade policy, tariff threats against allies by Trump, and criticism of the Federal Reserve.

ING Group pointed out in the report that by calculating the three-month correlation coefficient between the dollar index and US stocks as well as 10-year US Treasury bonds, the dollar has lost some of its safe-haven value compared to 2024. Private investors have not withdrawn; over 80% of US assets held by foreign investors are owned by private investors.

The report shows that the current weakness of the dollar is more cyclical than structural. Looking at the dollar’s usage in global assets, liabilities, market trading volume, and transactions, there is currently no sign of accelerated de-dollarization.

The report states that the independence of the Federal Reserve is the cornerstone of global financial stability. If the Fed is perceived to be cutting rates inappropriately, it could trigger a “run on the dollar.”

The dollar is likely to decline less this year than last year. ING Group forecasts that the euro will rise to $1.22 against the dollar by the end of the year, compared to about $1.18 currently. 

Editor: Li Tong