Dollar dominance is surviving the Iran war - just about
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The US dollar's status as a safe-haven currency has remained relatively stable despite the Iran war, but its performance may be attributed to the US economy's insulation from the crisis rather than the dollar's structural role. China's capital markets have shown remarkable calm during the crisis, potentially giving Washington pause for thought.
The US dollar's safe-haven status has been tested during the Iran war, with the currency strengthening by around 2 percent against a basket of other currencies. The S&P stock index fell by less than its peers, and US bond yields rose by 35 basis points to 4.3 percent. However, this performance may be due to the US economy's relative insulation from the crisis, given its emergence as a top producer of oil, gas, and weapons. China's capital markets have shown extraordinary calm, with the government's 10-year bond yield remaining unchanged. The dollar's dominance is still intact, but China's improving capital markets may be a sign of potential future challenges.
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