The US Dollar Index falls below 99, breaking the traditional safe-haven logic.

The US Dollar Index DXY fell over 0.5% intraday, currently at 98.68. Behind this seemingly ordinary data lies a profound shift in market dynamics. Amid escalating geopolitical tensions, the dollar is weakening, while traditional safe-haven assets like gold and silver are surging—breaking the historical pattern where the dollar tends to strengthen during crises.

Why the Dollar Weakens During a Crisis

According to the latest news, the US Dollar Index dropped from its high at the January 12 open to 98.68, a decline of over 0.5%. There are multiple reasons behind this:

US Economic Data Weakening Alters Expectations

US December job additions were only 50,000, well below market expectations of 60,000-70,000. More importantly, data from previous months was also revised downward, indicating a greater-than-expected cooling of the US labor market. This economic weakness signals have instead reinforced market expectations of Fed rate cuts—“bad news becomes good news”—leading investors to bet on more aggressive easing by the Fed, which diminishes the dollar’s appeal.

Global Risk Assets Strengthen, Diverting Funds

US stock indices rose across the board, gold broke a new all-time high above $4,560 per ounce, and silver soared above $84 per ounce. Capital is flowing heavily into hard assets and risk assets rather than traditional dollar safe havens. Analysts point out that this reflects a revaluation of currency risk—under expectations of ample liquidity, investors no longer need the dollar for safe-haven purposes.

Market Chain Reactions Are Already Evident

The crypto market has already begun to recover in line with this trend. According to the latest news, BTC and ETH are rising together amid the broad gains in US stock indices, with altcoins showing divergence but capital favoring mainstream coins. This indicates increasing risk appetite among investors, with funds shifting from safe assets to risk assets.

What Makes This Dollar Weakness Different

Historically, geopolitical crises tend to strengthen the dollar’s safe-haven status. But this time, the situation is different:

• Liquidity Expectations Change: Weak economic data no longer imply dollar strength but suggest the Fed will cut rates, increasing liquidity
• Shift in Safe-Haven Strategies: Investors are no longer relying solely on the dollar for safety but are turning to hard assets like gold and silver or allocating risk assets amid rate cut expectations
• Generational Shift: Senior investors note this is a generational change in market valuation methods, reflecting a new understanding of currency risk

On-chain data shows silver futures are in a futures premium state, indicating companies are hedging against future supply shortages, reflecting real demand in the real economy rather than mere speculation.

What to Watch Next

Whether the dollar index can continue to weaken depends on several key factors:

• Federal Reserve Policy Direction: The Fed meeting at the end of January is a critical point; the market needs confirmation of rate cut certainty
• US Inflation Data: Upcoming December CPI and PPI releases will directly influence the Fed’s policy path
• Global Economic Data: The performance of other major economies will also impact the dollar’s relative strength
• Geopolitical Developments: Although current crises haven’t strengthened the dollar, escalation could change market reactions

Summary

The US Dollar Index fell over 0.5% intraday to 98.68. Although this appears as a small fluctuation, it reflects a significant shift in market structure. Weakening economic data and rising rate cut expectations have broken the traditional pattern of dollar strength during crises. Capital is flowing from the dollar into gold, silver, and risk assets, which is a substantial positive for cryptocurrencies and other risk assets.

The key is whether this shift can be sustained—if the Fed signals rate cuts at the end of January, the trend of dollar weakening and crypto market recovery could further strengthen. Conversely, if the Fed maintains a hawkish stance, market sentiment may reverse again. Therefore, upcoming Fed policy guidance will be a decisive factor.