The nature of a crisis determines the dollar's role. During the tariff turmoil, the dollar weakened like a normal investment asset as the U.S. became a less attractive place to do business. In contrast, during the Iran war, its safe haven properties kicked in as investors prioritized security over economic outlook.

Current market chatter about reduced demand for U.S. assets is not a sign of a sudden de-dollarization crisis. Instead, it reflects a slow, rational diversification by global investors who are finding better relative value in other developed markets as their local interest rates rise.

The dollar's role as a global payment medium may decline, but its reserve currency status remains secure. This is because its core function is a 'store of wealth,' guaranteed by the unparalleled depth and liquidity of the U.S. bond market. No other currency offers a comparable safe haven for emergency funds.

While international investors frequently raise concerns about 'de-dollarization' and de-globalization, the narrative stalls when considering alternatives. The limited scale and lower yields of European and Japanese credit markets leave US dollar assets as the only viable option for many.

Talk of de-dollarization ignores the reality of the U.S. current account deficit, which requires selling over a trillion dollars in financial assets annually. As long as the world buys these dollar-denominated assets (debt and equity), the dollar's dominance is structurally reinforced, not diminished.

The narrative of de-dollarization weakening the dollar is misleading for near-term analysis. The dollar's strength is more correlated with sticky Foreign Direct Investment (FDI) inflows, not portfolio flows. Recent declines in central bank treasury holdings are a typical response to market stress, not a structural shift against the dollar.

Counterintuitively, a typical global reserve portfolio has a lower US dollar share (around 57%) than a return-seeking sovereign wealth fund's equity portfolio (up to 80%). The outperformance of US large-cap stocks makes any diversified equity strategy heavily weighted towards the dollar, independent of reserve policy.

Despite political tensions, China's policy of managing its currency exchange rate compels it to intervene in markets, often buying hundreds of billions of dollars a month. This makes China an unintentional, yet massive, force reinforcing the US dollar's global role, not dismantling it.

Despite political tensions, a vast majority of global trade, including oil sales between US adversaries China and Russia, is denominated in US dollars. This reliance gives the US an unparalleled national security tool and soft power, as the trade must cross through US financial institutions.