ING Groep NV stated in a Monday report that the U.S. dollar's role as a safe-haven asset has diminished since the beginning of 2024, though it has not been entirely lost. The report also indicated that there are no signs of a broad-based deterioration in global demand for the dollar.

The U.S. dollar index fell nearly 10% last year, marking its worst annual performance since 2017. Factors such as unpredictable U.S. trade policies, tariff threats against allies by former President Trump, and criticism directed at the Federal Reserve have all exerted pressure on the currency.

According to ING's analysis, based on three-month correlation calculations between the dollar index, U.S. equities, and 10-year Treasury yields, the dollar has lost some of its safe-haven appeal compared to earlier in 2024. Private investors have not yet withdrawn significantly—more than 80% of foreign-held U.S. assets are still owned by private investors.

The report suggests that the current weakness in the dollar is more cyclical than structural. Judging by the dollar's usage in global assets, liabilities, market trading volume, and transactions, there is no evidence of an acceleration in de-dollarization.

The report emphasized that the Federal Reserve's independence is a cornerstone of global financial stability. If the market perceives that the Fed is cutting interest rates inappropriately, it could trigger a "dollar run."

The dollar's decline this year is expected to be smaller than last year's. ING forecasts that the euro will rise to 1.22 against the dollar by year-end, compared to the current level of around 1.18.