Yen Rises as Investors Seek Safe Haven Amid U.S. Growth Concerns

The Japanese yen surged to a five-month high on Tuesday as investors sought safety amid growing concerns over a U.S. economic slowdown driven by tariffs. The yen peaked at 146.625 per dollar before settling at 146.85.

U.S. stocks took a hit, with the Nasdaq plunging 4% and the S&P 500 dropping 2.7%, reflecting fears of weaker economic growth. The dollar, which typically benefits during market turbulence, struggled as investors remained wary. The dollar index held steady at 103.89 after its biggest weekly drop in two years.

The Australian dollar dipped 0.4% to $0.6272, while the euro hovered above $1.08. The British pound maintained strength at $1.2875, staying above its 200-day moving average. The Canadian dollar and Mexican peso saw mild declines, trading at C$1.44 and 20.34 per dollar, respectively. China's yuan remained stable at 7.26 per dollar in offshore markets.

Investor uncertainty spiked following Donald Trump’s Fox News interview, where he mentioned a “period of transition” and avoided predicting whether tariffs on China, Canada, and Mexico would trigger a U.S. recession.

Bond markets reflected the risk-off sentiment, with U.S. 10-year yields falling as investors sought safer assets. The yield gap between U.S. and German bonds narrowed by 33 basis points, while the U.S.-Japan yield gap tightened by 17 basis points.

“The dollar usually gains when volatility rises, but with U.S. stocks and the economy at the center of concerns, its appeal as a safe haven is weakening,” said Chris Weston of Pepperstone. Analysts remain divided on whether the dollar will rebound or continue to lose ground as global markets react to ongoing economic shifts.