The Dollar Breakdown: A Turning Point in Global Currency Markets?

• This week, the US dollar became the latest casualty of escalating global turmoil. Here’s a breakdown of the key developments that have sent shockwaves through FX markets and investor sentiment:

US Dollar Hits Multi-Month Lows

• The Bloomberg Dollar Index dropped to its lowest level in six months, as global investors rapidly unwind USD positions amid growing concerns over the US economy and trade credibility.

China Retaliates Hard

• Beijing raised tariffs on all US goods from 84 percent to 125 percent, effective April 12. This sharp move follows President Trump’s recent 145 percent tariff hike on Chinese imports. The trade war is not just back — it’s intensifying.

Mass Exit from US Assets

• A broad risk-off sentiment is sweeping the globe. From equities to long-dated US Treasuries, investors are repositioning fast. One-year FX risk reversals flipped into negative territory for the dollar — for the first time in five years.

Haven Assets Surge

• The Swiss franc strengthened to levels not seen since 2015. The Japanese yen hit its strongest level since last September. Gold broke above 3,200 dollars per ounce, setting an all-time high. The euro also rallied to its highest level since early 2022.

Massive Repricing of Fed Expectations

• Traders are now pricing in nearly 100 basis points of rate cuts by the Federal Reserve this year, as the economic fallout from tariffs begins to weigh heavily on growth expectations.

What’s Next?:

• Markets aren’t just reacting to policy — they’re responding to a deeper credibility crisis. This week showed that even the world’s most liquid and trusted assets can be vulnerable when global trust begins to erode.
• What we’re witnessing may be the early stages of a long-term regime shift in capital flows and reserve preferences. One thing is clear: the “flight to safety” no longer automatically means buying dollars.