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Mike Dolan: Dollar's haven status may have always been a mirage
By Mike Dolan
Reuters
Monday, September 8, 2025
The dollar's sharp drop in April during a burst of tariff-related financial stress called into question what many had assumed to be its critical function as a safety trade. Some now wonder whether that haven status was ever truly warranted.
For much of the past 15 years, global investors have considered the dollar a natural hedge during economic and political shocks, allowing them to feel comfortable about amassing ever more U.S. assets while leaving their currency exposure largely unhedged.
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The argument was simple. If Wall Street took a plunge, it would drag most global assets down with it, but a countervailing surge in the dollar exchange rate would limit investors' losses on U.S. stocks and bonds.
But that didn't happen in March and April. As the S&P 500 fell by as much as 20%, the dollar index dropped 8%, prompting some soul-searching among investors and a wave of hedging. In turn, the U.S. currency recorded its worst January to June performance in the entire floating exchange rate era that began in 1973. ...
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