US dollar could lose safe-haven status, warns Deutsche Bank
If you thought U.S. Treasuries and the mighty dollar were unshakable pillars of global finance, this past week might have you seriously rethinking that belief.
Let’s break it down in plain English.
What Just Happened in the Markets?
Last week, U.S. bonds took a historic beating. The 30-year Treasury yield jumped a whopping 47 basis points—its sharpest rise since 1987. Not to be outdone, the 10-year yield spiked 49 basis points, marking the biggest weekly surge since 2001.
At the same time, the U.S. dollar index dropped 3%—its lowest in three years. That’s not a minor dip. It’s a signal. A big, flashing warning sign that something deeper is shifting.
And investors? They didn’t wait around to analyze. They moved their money, fast. Gold soared over 6.5%, reaching a record $3,200/oz, and traditional safe havens like the Swiss franc (+5.5%), yen (+2.4%), and euro (+3.5%) all surged.
Why Is This Happening Now?
A big part of the blame lies in President Trump’s trade policies. The escalation of tariffs and the widening trade war with China are rattling confidence in America’s financial stability.
One currency analyst put it plainly:
“Dedollarization was nonsense for my entire life—until this past week.” – Chris Vecchio
Translation? The world is starting to wonder if the U.S. is still the reliable financial anchor it once was.
Add to that a chaotic political environment, unpredictable fiscal decisions, and growing inflation expectations—and you’ve got the perfect storm for a bond and dollar meltdown.
What About the Stock Market?
Surprisingly, Wall Street had a good week—on paper.
The S&P 500 gained 5.7%, and the Nasdaq rebounded 7.3%, making it look like investors were celebrating. But don’t be fooled. That jump was largely due to a single day relief rally after Trump hinted at easing tariffs.
In reality, only half the previous week’s losses were clawed back, and the VIX (volatility index) remains about twice its usual level. That means fear and uncertainty are still running high.
Is the U.S. Still a Safe-Haven for Investors?
Historically, U.S. Treasuries and the dollar were the go-to assets during uncertain times. They were seen as safe, reliable, and strong.
But this week’s massive bond sell-off and dollar plunge suggest that confidence is cracking. Investors are starting to look elsewhere for safety—like gold, the Swiss franc, and even the euro.
And this shift isn’t just symbolic. It’s financial repositioning at a global scale.
What’s Happening Elsewhere?
- China’s yuan dropped to historic lows, with the offshore yuan hitting 7.4287 per dollar before recovering slightly.
- Oil prices struggled too. Brent crude hit a 4-year low of $58.40/bbl before recovering slightly, still down 25% year-on-year.
- Asian markets closed mixed, with Chinese stocks down 2.8%, and Japan’s Nikkei almost flat.
- High-yield U.S. bonds widened to 460 basis points—another worrying sign.
Can the Fed Step In?
They might want to. But they’re stuck.
While there’s pressure to cut interest rates and stimulate the economy, inflation expectations just jumped to their highest level since 1981. That ties the Fed’s hands. Cut rates now, and they risk igniting even more inflation.
In short? The Fed’s options are limited, and markets know it.
What Should Investors Watch This Week?
Looking ahead, here’s what might move the markets next:
- China’s trade data for March
- India’s wholesale inflation numbers
- Singapore’s Q1 GDP estimate
- Speeches from three key Fed officials: Thomas Barkin, Patrick Harker, and Raphael Bostic
In times like these, even minor updates could create major waves.
Final Thoughts: Is This the Start of Something Bigger?
It’s too early to declare the death of the dollar’s dominance, but last week was a clear sign that the global trust in American financial leadership is shaking.
Whether this trend continues depends on how the Trump administration, the Federal Reserve, and the global economy respond in the coming weeks.
For now, one thing’s clear: “safe-haven” is no longer synonymous with “American.”
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