US Dollar’s Safe-Haven Role Diminishes, ING Says

By Reuters — In a report released on February 23, 2026, financial services group ING said the U.S. dollar has lost some — though not all — of its traditional status as a safe-haven currency since 2024. While the dollar still retains broad global demand, recent market behavior and geopolitical developments have weakened the level of confidence investors place in the world’s most widely held currency.

Background: What Is a Safe Haven Currency?

A “safe-haven” currency is one that investors flock to in times of market stress or uncertainty. Traditionally, the U.S. dollar has been considered such a haven, along with assets like gold or government bonds, because of the size of the U.S. economy, deep financial markets, and wide use of the dollar in global transactions.

Key Insights from the ING Report

Partial Loss of Safe-Haven Value

The ING report argued that while the dollar has lost some of its safe-haven appeal compared with a year ago, it has not entirely lost that status. According to ING’s analysis, the measured correlation between the dollar index and other defensive assets — such as U.S. stocks and long-term Treasury yields — has shifted. This suggests that investors do not always rush into dollars when risk spikes.

No Broad Erosion of Global Demand

Despite this change, ING emphasized that there is “no broad deterioration” in global demand for the dollar. More than 80% of foreign holdings of U.S. assets remain in private investor portfolios, underscoring continued confidence in U.S. financial markets. ING interprets this as a sign that most investors still see the U.S. currency as a reliable store of value.

Cyclical — Not Structural — Weakness

Importantly, ING characterized the recent dollar weakness as “more cyclical than structural.” This means that current pressures — such as policy uncertainty and trade tensions — are seen as temporary influences rather than indications of a long-term decline in the currency’s global role.

Recent Dollar Performance in Context

The report comes after the dollar index — which measures the U.S. dollar against a basket of major global currencies — fell by nearly 10% in 2025, marking its weakest yearly performance since 2017. Analysts attributed downward pressure on the dollar to erratic U.S. trade policies, tariff threats from the Trump administration, and criticism directed at the Federal Reserve.

Policy Uncertainty and Market Reaction

Market observers have pointed out that unpredictable U.S. trade policy and tariff negotiations have unnerved investors, pushing some capital into other currencies or assets like gold. Uncertainty about Federal Reserve decisions has also played a role in currency volatility, as investors try to anticipate the timing and direction of interest rate changes.

Comparisons with Other Perceived Safe Havens

As confidence in the dollar as the default safe haven has softened, some investors have turned attention to other currencies or stores of value. Historically, the Swiss franc, Japanese yen, and even precious metals like gold have acted as alternatives during times of market stress. This trend reflects broader investor interest in diversifying away from sole reliance on the U.S. currency in turbulent periods.

Implications for Global Markets

If the dollar’s safe-haven status continues to soften, even gradually, it could have broad implications for financial markets, international trade, and global investment strategies. A less dominant dollar might reduce the currency’s traditional role as a go-to asset in crisis times and could encourage greater use of other currencies in international finance — a process sometimes referred to as “dedollarization.”

Investor Behavior and Reserve Holdings

For now, the report suggests that major shifts in reserve holdings or global currency strategies are not yet underway. Central banks and institutional investors continue to hold substantial quantities of U.S. assets, and the dollar remains a major component of global financial portfolios.

Future Outlook and Expectations

Looking ahead, ING analysts see the dollar’s outlook as tied to a combination of cyclical factors, including economic performance, interest rate outlooks, and geopolitical developments. Should uncertainty ease or U.S. economic data strengthen, the dollar could stabilize or regain some of its lost defensive appeal.

However, ING also cautioned that any overt interference in Federal Reserve policy or missteps that undermine investor trust could accelerate structural concerns — further weakening confidence over time.

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