Goldman Sachs warns: Middle East geopolitical risks restructure dollar's safe-haven properties, short-term negative correlation with US stocks reappears.

Goldman Sachs Group said this month that the geopolitical tensions centered around the Middle East are rebuilding the traditional inverse relationship between the US dollar and risk assets. Goldman Sachs strategists Stuart Jenkins, Teresa Alves, and Isabella Rosenberg wrote in a report on Wednesday that in the past eight trading days, the movement of the US dollar has been opposite to that of the S&P 500 index, contrasting sharply with the positive correlation between the dollar and risk assets seen earlier this year during the sell-off of US assets after President Trump launched a trade war. The report stated, "We believe this to some extent reflects a shift in the source of global risk shocks away from the US to other parts of the world (in this case primarily geopolitical developments in the Middle East)." However, over a longer period of about two months, the US dollar still shows a positive correlation with the US stock market. This means that as global risk sentiment improves, the US dollar often strengthens, and vice versa - a significant shift from its traditional role as a safe haven currency for global investors. Goldman Sachs also believes that the US dollar's decline this year will deepen over the next few months. Richard Chambers, head of global repo trading at Goldman Sachs, said on Tuesday that foreign investors increasing their rate hedges against the US dollar will further weigh on the dollar.