Washington, April 14 (NationPress) The US dollar has successfully maintained its position as a global safe-haven currency despite recent fluctuations, as indicated by the International Monetary Fund (IMF). This comes at a time when central banks around the world are on high alert to manage inflation risks prompted by the ongoing Middle East conflict.

During a press briefing with reporters from India, Japan, the UAE, the Netherlands, and Chile, IMF Chief Economist Pierre-Olivier Gourinchas noted that recent market trends are reflecting a return to more conventional patterns following a period of uncertainty.

"In this significant shock… we’ve observed movements that align more with the traditional role of the dollar as a safe asset," he remarked.

Last year, the dollar's performance raised eyebrows as it weakened amidst growing global uncertainty and escalating trade tensions.

"We noticed the dollar depreciating… which is not what you would typically expect," Gourinchas explained, highlighting that investors had not flocked to US treasuries as usually happens during times of crisis.

However, the latest events associated with the Middle East situation have reversed this trend.

"Since the onset of hostilities… the dollar has strengthened," he stated, adding that capital has been exiting emerging markets.

He pointed out that many emerging market currencies are under significant strain. "We’ve witnessed currencies… depreciating substantially," he noted.

While U.S. Treasury yields have seen an uptick, Gourinchas mentioned that this rise has been relatively moderate compared to other major economies. "They’ve increased less than the yields in other countries," he stated.

Overall, he expressed that concerns regarding the dollar's declining dominance have subsided. "I don’t believe there are serious doubts about the… position of the dollar in the international monetary framework," he added.

Simultaneously, central banks are confronted with a complicated policy landscape as they tackle the inflationary impact of surging energy prices.

Gourinchas described the current scenario as a "negative supply shock" that is simultaneously driving up inflation while hindering economic growth.

In such circumstances, he emphasized that central banks need to proceed with caution. "If we are anticipating a short-lived shock… you can afford to hold off and not take drastic measures," he mentioned.

Nonetheless, there is a risk that inflation could become entrenched through rising wages and widespread price hikes.

"The concern… is that… it evolves into a broader inflation issue, where all prices and wages begin to rise," he warned.

If inflation expectations begin to shift, central banks may need to take decisive action. "They must communicate very clearly… we’re going to apply the brakes… this will be challenging," he cautioned.

Gourinchas stressed that monetary policy cannot directly influence energy price shocks. "Increasing your policy rate won’t alter the price of oil," he noted.

Instead, central banks should concentrate on averting second-round effects, particularly the danger of a wage-price spiral.

"They need to be extremely vigilant… monitoring for warning signs," he stated.

The IMF’s analysis comes amid increased volatility in global financial markets following heightened tensions in the Middle East, which have disrupted energy supplies and escalated commodity prices.