The role of the US dollar as a global safe refuge is being challenged in the midst of growing budgetary deficits and commercial tensions. As the confidence of investors hesitates, traditional shelters such as the Swiss Franco and the Japanese Yen are gaining ground, pointing out a broader retirement of US assets, reports Jane Foley, Rabobank FX analyst.
Tariff fears shake confidence in the USD
“The inability of the USD Treasury Bond Market and the USD to function as safe shelters during the last week has disrupted market standards and undermine the benefits for the US of the ‘exceptionalism’. If the cost of indebtedness for the US US budget deficit stood at 6.4% of GDP. “
“The USD’s dominance within the global payments system suggests that an increase in the demand for the dollar could occur if investors begin to worry about a credit event in the market. However, for now, the story that seems to dominate the flows is the fear that the positive growth perspective for the US corporation has reached an abrupt high under the weight of the tariff news. These fears are mixed with concerns. Aggressive isolationist policies of Trump have damaged the country’s reputation. “
“While USD failure to behave as a safe shelter in turbulence is unusual, the CHF and the JPY have been showing manual behavior. While the quality of the dollar’s refuge is based on their dominance as billing and reserve currency, the CHF and the JPY derive their strength of the tendency of investors to repatriate money when uncertainty increases. Both currencies are associated with countries Out of current account. “
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
