Investor dump U.S dollar amid High Uncertainty
The ongoing trade war has raised concerns about the US dollar’s ability to serve as a safe haven, leading to its continued decline against other major currencies on Friday. China responded to the most recent US tariffs of 145 percent by imposing 125 percent tariffs on American goods.
The US Dollar Index (DXY), which had already reached a new three-year low, continued its downward trend during Friday’s session, closing at approximately 99.7.
Investor confidence is generally waning amid a bleak outlook for the US economy. Investor anxiety over an imminent recession is reflected in the greenback. The dollar and Treasury remain vulnerable to future collapses and function as high-beta assets about risk sentiment.
Repairing the harm will necessitate a more extensive relaxation of Trump’s protectionist policies, even if the dollar recovers on good trade news.
The market reacted negatively when the Producer Price Index reported lower-than-expected results for April, and the University of Michigan sentiment index showed a decline, raising fears of deflation.
Labor market data presented a mixed picture, with unemployment claims slightly increasing to 223,000, while continuing claims decreased to 1.85 million. China’s confirmation of retaliatory tariffs on US imports, matching Washington’s hike of 125 percent, intensified concerns about a potential global recession.
Despite these economic worries, the dollar weakened over the past week. On April 1, just before Liberation Day, the 10-year US Treasury bond yield was 4.17 percent, but on Friday, it rose to 4.46 percent. Typically, one would not expect the dollar to decline as Treasury yields increase.
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