TOKYO: The dollar slumped on Friday as waning confidence in the U.S. economy prompted investors to ditch U.S. assets to the benefit of safe havens such as the Swiss franc, yen and euro, as well as gold.
The yellow metal recorded a new all-time peak, and the franc notched a fresh decade high.
Investors dumped Wall Street stocks overnight, as a powerful relief rally on Wednesday - when President Donald Trump abruptly paused higher tariff rates on dozens of trading partners - reversed course in a frenetic 24-hour period for markets. Longer-dated U.S. Treasuries are also selling off, putting 10-year yields on course for their biggest weekly jump since 2001.
Trump’s 90-day respite, which came despite his insistence for days that his policies would never change, didn’t include China. Instead, he ratcheted up duties on Chinese imports to an effective 145% rate, further escalating a high-stakes confrontation between the world’s two largest economies.
The Chinese yuan had tumbled to an all-time low in offshore trading on Tuesday, but erased all those losses a day later, and surged again on Thursday.
It initially strengthened in the latest session as well, before trading slightly weaker.
“There has been a pronounced ‘sell U.S.’ vibe flowing through broad markets and into the classic safe-haven assets, with the USD losing the safe-haven bid,” said Chris Weston, head of research at Pepperstone.
“The moves (have) the feel of repatriation flows by foreign entities, with many re-focused on the idea that Trump’s reluctant pause on tariffs was due to increased system risk, and migrating capital away from Ground Zero.”
U.S. Treasury Secretary Scott Bessent asserted on Wednesday that the tariff pullback had been the plan all along to bring countries to the bargaining table.
Trump, though, later indicated that the near-panic in markets that had unfolded since his April 2 “Liberation Day” tariff announcements had factored into his thinking.
Since returning to the White House in January, Trump has repeatedly threatened an array of punitive measures on trading partners, only to revoke some of them at the last minute.
The on-again, off-again approach has baffled world leaders and spooked business executives, who say the uncertainty has made it difficult to forecast market conditions.
The dollar dropped as much as 1.2% to 0.81405 Swiss franc for the first time since January 2015, extending Thursday’s nearly 4% plunge.
The U.S. currency slid 1.1% to 142.88 yen , the weakest since September 30. It also slumped 0.5% to a five-month trough at C$1.3910.
The euro surged as much as 1.7% to $1.13855, a level last seen in February 2022.
The dollar index , which measures the greenback against those four currencies and two more major counterparts, sagged as much as 1.2%, taking it below the 100 level for the first time since July 2023.
The U.S. currency drooped as much as 0.3% to 7.2903 yuan in the offshore market in early trading, but was last up 0.1% to 7.3211.
In the previous two sessions, it slid 1.5%.
Gold jumped 1.4% to an unprecedented $3,219.23 per ounce.
Elsewhere, the benchmark 10-year Treasury yield climbed nearly 10 basis points early on Friday to 4.488%.
“Trump blinked on higher yields, but that doesn’t mean 10-year yields can’t retest 4.50% while the USD sells off in tandem,” said Brent Donnelly, president of Spectra Markets.
“I think we are entering a pure ‘sell USD’ regime,” he said. “Rate differentials are losing their sway over the USD for the first time in my life.”
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