Is the Dollar No Longer a Safe Haven?

One of the recurring themes of the Forex market over the past two years has been that the US Dollar is perceived as a haven currency which investors rush to when times get scary or uncertain.

Now, when it seems like there is total chaos in the Middle East, the Euro still gained over 0.6% over the Dollar in today’s trading. Are things changing?

Other “safe havens” such as Gold and Silver are still behaving as they should and both metals have risen in value today. But the US Dollar is weak.

One reason may be the rising price of oil. The price of a barrel of crude went passed the $102 mark today. As oil prices are quoted in Dollars, the higher they go the lower the US Dollar tends to be.

But this seems to be just part of the reason. The other reason is that the US economy is in bad shape. The debt is very high and it keeps getting higher. There doesn’t seem to be any political willingness to tackle America’s problem is a constructive and adult way. No one is willing to sacrifice and invest in the future.

In Europe, things seem better. Governments took action when crisis hit and were not afraid to deal with an unsatisfied public. Some of these measures were not ideal but they did serve a purpose to show the rest of the world that Europeans did not avoid hard decisions when they had to be made.

America is Perceived As Weak

I believe that the Dollar is going through a rough time and that it’s unclear if and when things will improve for the greenback. Truth be told, the US looks pretty powerless as its allies in the Middle East appear shaky. No one knows how far the turmoil in the Middle East will go and whether oil prices will continue to rise. Some already speak of looming energy and food price crises. All this will greatly affect the US… should it happen.

At the moment, the uncertainty in the world is not enough to raise the Dollar since much of the uncertainty revolves around the US and its position in the world. For the time being, the Dollar is no longer a haven currency.