02.04.2026 07:00
DBS strategist Philip Wee suggests that the US Dollar’s short-term appeal as a safe haven could stall unless US equities hit new yearly lows. He observes that traders have refrained from driving the DXY Index above the 100.5 threshold following Federal Reserve Chair Jerome Powell’s pushback against aggressive rate-hike expectations, emphasizing that inflation fears remain contained and worries over a 1970s-style wage-price spiral have eased.
Wee notes that the dollar’s haven status is now contingent on further weakness in equity markets. “With the Good Friday holiday approaching, US financial markets are likely to adopt a more cautious stance,” he explains. “The recent two-day rebound in equities could easily be a dead cat bounce, and no one can rule that out.” He adds, “For the USD, the near-term picture is slightly different—its haven appeal may pause unless the S&P 500 plunges to a fresh yearly low.”
According to Wee, market participants have stepped back from pushing the DXY above 100.5 after Powell downplayed the risk of persistent inflation driven by higher energy prices, signaling that inflation expectations remain anchored and that the Fed is not panicking about a wage-price spiral reminiscent of the 1970s. Fed officials have followed Powell’s lead in assessing the Iranian conflict, echoing the wait-and-see stance taken after the Liberation Day tariffs. Fed Governor Michael Barr cautioned that the conflict presents a double-edged sword for inflation and growth, particularly if it drags on.
Wee also points to the Atlanta Fed’s GDPNow model, which has weakened the narrative of US economic exceptionalism by projecting growth of 1.95%, down from 3% at the start of Operation Epic Fury a month ago. He suggests that Friday’s US monthly jobs data could reinforce the factors that have already pulled the 10-year Treasury yield down from its seven-to-eight-month peak near 4.50%.
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Source: https://www.fxstreet.com/news/usd-haven-bid-may-pause-with-capped-dxy-dbs-202604020628
