The dollar index rose nearly 1% on Monday, marking its strongest one-day performance in seven months, according to a Reuters report. The rally was broad-based, with the greenback gaining against major peers as investors sought safety amid fears of a further hike.
The rebound comes after months of doubt about the dollar’s crisis-era appeal. That doubt arose last year when currencies fell amid a tariff-driven global selloff triggered by Washington’s sweeping trade measures announced on April 2, 2025, an event market participants dubbed “Freedom Day” that failed to strengthen. During the event, the dollar’s muted response raised concerns that its reflexive safe-haven bid may be weak.
This time, however, the script looks different. The depth and liquidity of US financial markets remains a decisive advantage, analysts told Reuters. In times of severe stress, the US Treasury market is seen as the only place capable of absorbing massive international flows. When investors flock to Treasuries, demand for dollars naturally follows.
The lack of viable alternatives has also strengthened the currency’s appeal. While the euro, yen and gold have drawn safe-haven benefits in recent months, the scale and reach of U.S. markets make it difficult for global investors to completely eliminate the dollar while reducing large-scale risk, investment managers said.
Why did the dollar stagnate earlier?
Market participants believe that the extraordinary weakness of the past year was caused by the risk itself during the turmoil in the dollar. Because the shock was caused by US policy, as aggressive tariff measures, investors were reluctant to take refuge in currencies associated with uncertainty. Analysts noted that the incident temporarily reduced the dollar’s central role in global finance, prompting investors to shift to non-US assets.
In contrast, the current violence is geopolitical and external in nature. When volatility arises outside of US policy actions, the dollar’s defensive characteristics re-emerge. Strategists told Reuters that Monday’s market behavior reinforced the view that the greenback’s asylum demand remains amid a globally driven crisis.
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Energy Dynamics adds support
Another factor supporting the dollar’s fall was the United States’ status as a net energy exporter. Rising oil prices often hurt energy-importing economies, depressing their currencies. However, the United States is relatively immune to such shocks than Europe or Japan. Reuters reported that this dynamic added structural stability to the dollar during the recent rally in crude prices.
That said, not all market watchers believe the dollar’s housing situation is permanently secure. Some analysts warn that the debate over the greenback’s long-term resilience is far from settled. A high US fiscal deficit, policy instability and heavy global exposure to US assets could alter traditional relationships, under certain types of shocks.
In particular, if the next crisis stems from broader economic fears rather than energy constraints or liquidity pressures, the dollar may not respond decisively. Portfolio managers told Reuters that amid fears of general growth, the currency could behave more like a risk asset than a safe haven.
Oil holds the key
Looking ahead, oil prices may prove decisive. Macro strategists said that if crude oil continues to rise and risk appetite remains subdued, the dollar is likely to hold its bid. Conversely, if oil retreats and tensions subside, classic safe havens such as the Swiss franc and Japanese yen could recover.
For now, though, the dollar’s performance has reassured investors. In a week marked by airstrikes, oil scandals and heightened geopolitical anxiety, the greenback reminded markets why it has long been considered the world’s last financial haven.
