Fool’s gold: How geopolitical risk is taking some of the shine off the US dollar - cepr.org

The US dollar has long been treated as a safe haven in times of global stress. A recent analysis from CEPR, however, suggests that geopolitical risk may be chipping away at that status—eroding some of the "shine" that has historically drawn capital toward dollar-denominated assets.

The argument is not that the dollar is losing its reserve role overnight. Rather, it points to a subtler shift: when geopolitics itself becomes a source of uncertainty, the dollar's appeal as a neutral refuge can weaken. That matters for markets because the dollar sits at the center of global trade, debt, and commodity pricing. If its safe-haven premium narrows, the effects can ripple through currency pairs, cross-border borrowing costs, and inflation via import prices.

For observers, the key question is whether this is a durable repricing or a temporary sentiment swing. Watch shifts in official reserve holdings, demand at dollar funding auctions, and how the currency responds to geopolitical shocks relative to gold and other alternatives.