Why is the Dollar Still a Safe Play?

The U.S. dollar index hit a new high on Monday, reaching a level it had not seen in nearly two months. The euro declined most sharply against the dollar, falling roughly 1%. Some economic commentators came to the conclusion that the dollar was down on investors' fears over the debt situation in Europe--Standard and Poor's decision to downgrade Italy being the primary catalyst. So why is the dollar moving on a "safe haven" vector? After the economic crisis in 2008, the dollar strengthened tremendously as investors dumped their assets to hold cash. The dollar is the world's reserve currency. Oil transactions are performed in dollars. The move made sense. But it isn't 2008 anymore. The Federal Reserve has flooded the market with liquidity. Other countries have openly attacked the dollar's reserve status. Some have speculated that the financial problems in the U.S. overshadow those in Europe. An economic Ph.D. has predicted hyperinflation in the United States in the near future. Perhaps other options simply do not exist. In terms of currencies, the euro and yen face tremendous stress and the Chinese Central Bank prevents the yuan from being freely traded. There are few other currencies with the financial support structure to fulfill the world's economic needs. Gold and silver have become an increasingly attractive option, but after silver's collapse earlier in the month, investors may be weary to park their funds in the metals. Real estate is still rearing from 2008, and equities may be overvalued. Does cash simply benefit from being the only viable option? Investors looking to play increased dollar strength might wish to consider PowerShares DB US Dollar Bullish Index UUP. UUP may do well if investors continue to flee to cash. In the face of major problems, how much longer will the dollar remain the safe haven play?