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The U.S. dollar resumed its sharp decline on Wednesday, falling broadly across major currencies as escalating trade tensions, shaky investor sentiment, and growing fears of a U.S. recession weighed on the greenback. The losses were most pronounced against traditional safe-haven currencies such as the Swiss franc and euro.
Greenback Hit by Tariff Turmoil and Policy Uncertainty
Following a brief reprieve on Tuesday, the dollar reversed course during European trading hours, slipping closer to last week’s lows. The selloff was triggered by:
- New U.S. restrictions on semiconductor exports to China
- A fresh Trump administration probe into potential tariffs on critical minerals
- Ongoing volatility and unpredictability in U.S. trade policy
These developments have deepened investor anxiety, pushing capital away from dollar-denominated assets.
Swiss Franc Surges to Near-Decade Highs
- USD/CHF fell 0.7% to 0.8175, just above its lowest level in 10 years
- The franc is now the best-performing G10 currency since the April 2 tariff announcement
Safe-haven demand is fueling the rally, but it may have unintended monetary consequences:
- The Swiss National Bank (SNB) could be forced to reconsider negative interest rates to combat deflationary risks
- Market speculation is rising that the SNB won’t intervene, emboldening traders to add long franc positions
Euro Gains on Portfolio Rebalancing
- EUR/USD rose 0.7% to $1.1356
- The euro has gained ~5% since early April as European investors scale back their U.S. exposure
The euro’s strength is also supported by rate cut expectations from the ECB, which have become more measured amid stable inflation and ongoing U.S. turbulence.
Yen Watch: Strong Flows, But Reversal Risk
- USD/JPY fell 0.4% to 142.69, after touching a seven-month low
- Traders are watching talks between Japan’s economy minister and U.S. Treasury Secretary for clues on coordinated FX policy
However, record-high net long yen positions (stretching back to 1986) mean there’s a risk of sharp pullbacks if sentiment shifts.
Canadian Dollar Among Top Performers
- USD/CAD dropped 0.3% to C$1.3916
- The loonie is up 4% in April, supported by:
- Reduced U.S. exposure
- Firm oil prices
- Expectations of a more stable policy environment
Markets are split ahead of today’s Bank of Canada decision, with a 40% chance of a rate cut priced in.
Pound Resilient Despite Soft Inflation Data
- GBP/USD rose 0.28% to $1.3270, after earlier touching a six-month high of $1.3292
- The pound shrugged off cooler CPI readings as traders continue to bet on BoE caution and UK resilience amid global uncertainty
AUD, NZD Hold Ground; China Data Overlooked
- AUD/USD at $0.637, NZD/USD at $0.5913
- Both currencies remain near recent highs, buoyed by:
- A weaker dollar
- Risk-sensitive flows
- Markets largely ignored China’s stronger-than-expected Q1 GDP, instead focusing on trade war fallout
Yuan Steady Amid Managed Weakness
- Onshore CNY at 7.3064, Offshore CNH at 7.3080, both slightly higher on the day
- PBoC has allowed limited depreciation, despite escalating tariffs now exceeding 100%
- Authorities are balancing between competitiveness and capital stability
Outlook: Dollar Faces a Confidence Crisis
With Fed Chair Jerome Powell, U.S. retail sales, and the BoC rate decision all on the calendar, the dollar’s slide could continue — or intensify — if:
- U.S. data disappoints
- Powell signals growing recession concerns
- The BoC opts for a hawkish hold
Unless the Trump administration stabilizes trade rhetoric, the dollar could remain under broad selling pressure, with safe-haven and European currencies leading the charge.
