Yen and Swiss Franc Strengthen as Trump’s Trade War Pressures the Dollar

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Investors sold off the dollar and flocked to safe-haven currencies like the yen and Swiss franc on Monday, following U.S. President Donald Trump’s announcement of sweeping tariffs on global trade.

Pro-growth currencies such as the Australian and New Zealand dollars were hit hard in the market sell-off, which wiped nearly $6 trillion from U.S. stock market value last week amid growing concerns of a global recession, particularly in the U.S. The Aussie dropped 0.73% to $0.6001, hitting a five-year low earlier, while the kiwi fell 0.75% to $0.5554.

More than 50 countries have reached out to the White House for trade talks, while China responded to the tariffs with countermeasures, including additional levies of 34% on all U.S. goods and export restrictions on certain rare earths.

The dollar weakened 1.3% against the yen to 144.95, remaining close to a six-month low, and extended its nearly 2% decline from the previous week. The Swiss franc surged more than 1% to 0.85095 per dollar, continuing its 2.3% rally from the week before.

Both the yen and Swiss franc have emerged as clear winners from Trump’s latest tariff actions, with investors flocking to safer assets such as government bonds and gold.

"The primary theme has been selling USD/JPY, as it’s a good proxy for U.S. recession and U.S. yields," said Brent Donnelly, president of Spectra Markets. While the dollar is usually seen as a safe haven, its status seems to be diminishing as uncertainties surrounding tariffs and their impact on U.S. economic growth continue to rise.

The euro rose 0.26% to $1.0994, while the British pound eased 0.13% to $1.2889. The dollar index fell 0.4% to 102.48, extending its 1% decline from last week.

"With the U.S. at the center of the trade war, the USD has been facing outflows as investors look to diversify away from U.S. assets," said Rodrigo Catril, senior FX strategist at National Australia Bank. Traders are increasing their bets on further Federal Reserve rate cuts, expecting policymakers to ease more aggressively to support U.S. economic growth.

Futures indicate that 100 basis points of rate cuts are priced in by December, although Fed Chair Jerome Powell cautioned last Friday that it’s too early to determine the appropriate response.

The focus in Asia on Monday will also be on China’s yuan midpoint fixing, as traders watch for signs of whether Beijing will tolerate a weaker currency amid the escalating trade tensions with the U.S. The offshore yuan remained largely unchanged at 7.2861 per dollar ahead of the opening of China’s onshore market.

Paraphrasing text from "Reuters" all rights reserved by the original author