Dollar slumps as traders scramble to sell America

The dollar plummeted to its lowest value in three years on Friday, as investors divested US assets, initiating a significant ‘sell America‘ trend in global markets. This shift reflects growing concerns about the American economic outlook.

US government bonds also experienced increased selling pressure. The temporary relief offered by Donald Trump’s 90-day tariff suspension earlier in the week proved to be transitory, failing to reassure market participants.

Francesco Pesole, FX strategist at ING Bank, commented: ‘This tumultuous week for financial markets concludes with substantial dollar declines. The debate regarding a possible dollar confidence crisis is no longer theoretical – it is unequivocally underway.’

‘This rapid depreciation is currently serving as a clear indicator of a widespread ‘sell America‘ sentiment across global investment portfolios,’ Pesole added.

Dollar Index Hits Three-Year Low Amid Recession Fears

The dollar index, which measures the dollar against a group of major currencies, decreased to 99, marking the lowest point since April 2022. This decline coincides with escalating fears of a potential US recession.

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Safe-Haven Currencies and Gold Surge

Japan’s yen and the Swiss franc emerged as primary beneficiaries of the market unease. The euro also experienced a surge, reaching nearly $1.15, its peak since February 2022. Similarly, the pound surpassed $1.31, while gold reached a new all-time peak, exceeding $3,245 per ounce.

Tariff Pause Proves Ineffective

US ten-year borrowing costs are on track for their most significant weekly increase since 1981, as government bonds continued their sell-off.

Bond yields, which move inversely to bond prices, ascended to 4.59 percent. This rise is expected to cause significant concern within the White House, given its potential implications for the economy.

It is widely speculated that Trump’s earlier tariff concessions were a response to the bond market sell-off. However, the renewed selling pressure and the dollar’s slump indicate that this policy shift has not reassured markets.

UK Gilts Affected

The market turbulence also had ramifications for Britain, with government borrowing costs also increasing. Yields on 30-year gilts have seen their most rapid increase this week since the financial instability following Liz Truss’s mini-Budget in 2022.

George Saravelos, Head of FX Research at Deutsche Bank, asserted regarding the dollar: ‘The market is reevaluating the underlying appeal of the dollar as the world’s global reserve currency and is undergoing a phase of accelerated de-dollarisation.’

‘This trend is most apparent in the ongoing and combined decline of both the currency and the US bond market,’ Saravelos added.

Stock Markets Show Mixed Performance

Stock markets displayed a more stable trend at the close of a volatile week. In London, the FTSE 100 concluded trading 50.93 points higher, a 0.6 percent increase, reaching 7964.18. Conversely, Germany’s Dax experienced a 0.9 percent decrease, and France’s Cac 40 declined by 0.3 percent – moderate declines following recent market turbulence.

US Stocks Rebound

US stocks, however, showed a positive trend. New York’s Dow Jones Industrial Average rose by 1.4 percent, the S&P 500 increased by 1.7 percent, and the Nasdaq Composite gained 1.8 percent.

Economic Uncertainty and Recession Fears Mount

Jamie Dimon, CEO of JP Morgan Chase and often considered the most influential banker globally, stated that the economy ‘is encountering significant turbulence’ and that ‘individuals are exercising caution and reducing deal activity.’ JP Morgan Chase has estimated the probability of a US recession at 50 percent.

Similarly, Larry Fink, CEO of Blackrock, a leading asset management firm, remarked: ‘Uncertainty and anxiety are prevalent in every client discussion. I believe we are either on the verge of a recession, or already experiencing one.’