NEW YORK: Investors bought into safe havens such as the dollar, yen and Swiss franc on Monday as concerns about a global recession heightened following US President Donald Trump’s sweeping tariffs on trading partners.
Global markets plunged on Monday, with Wall Street stocks trading lower after Asian shares sank, as investors wagered the mounting risk of a deep economic downturn could lead to a cut in US interest rates as early as May.
The risk-sensitive Australian and New Zealand dollars, as well as the Swedish and Norwegian crowns, all dropped against the dollar.
The dollar cut its losses against other safe-haven currencies. It was up 0.50% against the yen to 147.605, after tumbling more than 1.4% earlier in the session.
The dollar also hit its lowest in six months against the Swiss franc and was last down 0.06% at 0.8605 franc in choppy trading..
“The only thing we know for sure is that it’s volatile … But I think broadly, leaving aside nuances, because tariffs are thought to be hurting world growth, those currencies that seem to be more like risk-on currencies - the dollar bloc and the Scandies - they are underperforming,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
“On the other hand, the currencies that are typically safe-haven currencies - like the Swiss franc and yen - are performing better.”
The euro, which gained as much as 0.7% to $1.1050 earlier in the session, was down 0.39% at $1.091775.
“The euro has certainly performed really quite well over the last couple of days since we’ve heard about the tariffs,” said Jane Foley, head of FX strategy at Rabobank.
“Maybe that’s related to the euro zone current account position, or maybe it’s just related to investors still moving out of US assets and still not quite sure where they should be moving their money to.”
While the dollar is typically known as a safe-haven asset, that status seems to be eroding as uncertainty over tariffs and concern over their impact on US growth intensify.
European Union countries will seek to present a united front in the coming days against Trump’s tariffs, likely approving a first set of targeted countermeasures on up to $28 billion of US imports ranging from dental floss to diamonds.
Sterling hit a one-month low at $1.27465 and was last down 1.05% against the greenback.
The Aussie, often used as a proxy for risk appetite, tumbled to a five-year low earlier in the session, but was last down 0.51% to $0.601.
The New Zealand dollar eased 0.86% to $0.5547, having slid more than 1% earlier in the session.
Trump’s tariff announcements wiped out nearly $6 trillion in value from US stocks last week. When asked about the impact, Trump said on Sunday that sometimes “medicine” was needed to fix things, adding he was not intentionally engineering a market selloff.
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