The U.S. dollar is increasingly being viewed as the primary safe haven in global foreign exchange markets, as geopolitical tensions continue to rise. According to a recent note from Bank of America, investors are shifting their positioning toward the dollar in response to growing uncertainty.
Analysts led by Adarsh Sinha highlighted that quantitative models suggest markets are preparing for a prolonged conflict and sustained higher energy prices. This outlook has driven a clear move into the U.S. dollar, which the bank expects to benefit the most from current conditions.
Bank of America stated that bullish signals for the dollar have been triggered against all other traditional safe-haven currencies. Data from options markets also show strong demand for U.S. dollar call options, indicating growing investor confidence in further dollar strength.
The bank emphasized that risks linked to the Middle East conflict are increasing. As the situation enters its third week, analysts believe the likelihood of a longer-lasting conflict and structurally higher energy prices has risen significantly. While markets were initially slow to reflect this scenario, a broader repricing is now underway, which is expected to further support the dollar.
Technical indicators also point to weakness in other currencies. Bank of America flagged bearish signals for the Swedish krona and the New Zealand dollar, both of which tend to decline during periods of macroeconomic stress. The bank’s latest strategy favors long positions in USD/SEK and short positions in NZD/USD.
Even traditional safe-haven currencies are losing strength against the dollar. The euro and Japanese yen have remained in downward trends for several weeks, while the Swiss franc has also started to weaken.
Bank of America concluded that until there is a clear de-escalation in geopolitical tensions, the U.S. dollar is likely to remain the dominant safe haven in the foreign exchange market.
