Dollar Plunges as Trade War Fuels Global Shift
The U.S. dollar continued its precipitous decline Friday, hitting decade-low levels against the Swiss franc and a three-year low versus the euro, as escalating trade tensions between the United States and China trigger what experts describe as a significant shift in global investment patterns.
China announced Friday it would increase tariffs on U.S. imports to 125% from 84%, retaliating against President Donald Trump’s decision to hike duties on Chinese goods to 145%. The tit-for-tat measures have sent shockwaves through financial markets, with unusual movements suggesting a potential realignment of global capital flows.
“There’s a great rotation, which is basically foreign investors diversifying away from the U.S. into other regions such as the euro zone,” Brad Bechtel, global head of FX at Jefferies, told Reuters. “And for those foreign investors still involved in the U.S., they’re realizing they need to currency hedge their assets.”
Historic Market Movements
The dollar fell 0.9% against the Swiss franc to 0.81650, its lowest level since January 2015, and dropped 0.51% against the Japanese yen to 144.05, its weakest point since September 2024. Against the euro, the greenback plummeted 1.25% to $1.13405, reaching levels not seen since February 2022.
These movements have come alongside a historic surge in U.S. Treasury yields, with the benchmark 10-year note on track for its biggest weekly jump since 2001. Gold prices soared past $3,200 an ounce, hitting fresh new highs partially supported by dollar weakness.
“It’s more really loss of confidence and credibility in the dollar and then in U.S. policymaking,” Win Thin, global head of markets strategy at Brown Brothers Harriman, explained to Reuters. “Typically in risk-off episodes, the dollar should gain as a safe haven, but it’s really been the yen and Swiss franc that have been picking that up.”
US Dollar Index just crashed to a 3-year low.
— Fintech’s Fair Play (@FintechFairPlay) April 11, 2025
Trump’s trade war isn’t just backfiring — it’s nuking America’s economic credibility.
DXY at 99.00 — below the psychological floor.
Big money already leaving.
Retail still asking: “Should I sell now?”
Too late. Smart money sold… pic.twitter.com/yyChpJ57jJ
Economic Warning Signs
Minneapolis Federal Reserve President Neel Kashkari noted the unusual market dynamics during a Friday interview with CNBC. “Normally, when you see big tariff increases, I would have expected the dollar to go up. The fact that the dollar is going down at the same time, I think, lends some more credibility to the story of investor preferences shifting.”
U.S. consumer sentiment deteriorated sharply in April while 12-month inflation expectations surged to 6.7%, the highest level since 1981, according to the University of Michigan survey. This declining confidence comes amid growing fears that escalating trade tensions could push the global economy toward recession.
“This decline was, like last month’s, pervasive and unanimous across age, income, education, geographic region, and political affiliation,” noted Joanne Hsu, the survey’s director, as reported by the Associated Press.
Market Volatility Continues
Despite the dollar’s decline, U.S. stock markets managed to recover from early losses Friday. The S&P 500 rallied 1.8% after swinging between gains and losses throughout the session, while the Dow Jones Industrial Average climbed 619 points, or 1.6%, and the Nasdaq jumped 2.1%.
The recovery came partly after Federal Reserve officials indicated readiness to act if market conditions deteriorate further. Susan Collins, president of the Federal Reserve Bank of Boston, told the Financial Times that the Fed “would absolutely be prepared” if markets become disorderly and “does have tools to address concerns about market functioning or liquidity should they arise.”
Several major U.S. banks, including JPMorgan Chase, Morgan Stanley, and Wells Fargo, reported stronger-than-expected first-quarter profits, providing some positive news amid the market turbulence.
Global Implications
The Chinese Finance Ministry criticized the U.S. approach, stating that the repeated tariff increases “has become a numbers game, which has no practical economic significance, and will become a joke in the history of the world economy.” The ministry warned that if the U.S. “insists on continuing to substantially infringe on China’s interests, China will resolutely counter and fight to the end.”
Market analysts warn that the volatility is likely to continue as the trade war escalates. “We remain in the early innings of this global trade regime change, and while the 90-day pause on reciprocal tariffs temporarily reversed the market selloff, it does prolong uncertainty,” said Darrell Cronk, president of Wells Fargo Investment Institute.
As investors reassess the global financial landscape, traditional safe havens like gold, the Swiss franc, and the Japanese yen are benefiting from capital flows that would typically favor U.S. assets during periods of market stress—a development that could signal a significant shift in the international monetary order.
