Dollar Sinks as Global Recession Fears Drive Investors to Safe Havens

The U.S. dollar weakened sharply on Monday as investors fled to safe haven currencies like the Japanese yen and Swiss franc, following President Donald Trump’s sweeping new tariffs. Concerns over a looming global recession, especially in the U.S., triggered a sell-off in risk assets, wiping out nearly $6 trillion in U.S. stock value last week.

The yen rose 1.3% to 144.95 per dollar, nearing a six-month high, while the Swiss franc gained over 1%, trading at 0.85095. Both currencies extended strong gains from the previous week as demand for safe assets surged. U.S. government bonds and gold also rallied.

The Australian and New Zealand dollars, seen as pro-growth currencies, slumped in the rout. The Aussie fell 0.73% to $0.6001, a five-year low, while the kiwi dropped 0.75% to $0.5554. The euro edged up 0.26% to $1.0994, and the British pound eased slightly to $1.2889.

The dollar index fell more than 0.4% to 102.48, extending last week’s 1% drop. Analysts point to investor fears over U.S. economic resilience as the country finds itself at the center of an escalating trade war. China retaliated with 34% tariffs on all U.S. goods and export restrictions on rare earths.

Fed rate cut expectations have intensified, with markets pricing in 100 basis points of easing by year-end. However, Fed Chair Jerome Powell signaled it may be too early to determine the central bank’s next move.

Meanwhile, traders are closely watching China’s yuan fixing for clues on Beijing’s stance amid rising tensions. The offshore yuan held steady at 7.2861 per dollar.

With risk aversion rising, the dollar’s safe-haven status appears to be weakening in the face of mounting trade and growth uncertainties.