USD Safe Haven Status Remains Supported Amid Strait Disruptions

The US Dollar's relationship with oil and its safe haven status is evolving, according to Rabobank's Senior FX Strategist Jane Foley. While reduced Fed rate hike speculation opens downside risks for the Dollar, ongoing Strait of Hormuz disruptions support a premium.

Foley notes that since 2022, it has become widely perceived that the US's energy exporter status has altered the relationship between the US Dollar and oil. This year, the US's energy exporter status helped renew the USD's safe haven credentials at the start of the Iran war.

However, correlations within FX markets are rarely robust or straightforward due to the confluence of factors that drive markets. Fed rate hike speculation has recently suffered a setback on the back of recent US data releases, opening the prospect of further slippage for the greenback.