Dollar weakens as investors seek safe havens

March 10, 2025 (MLN): The dollar was softer on Monday and trading near its lowest level in four months against major currencies as concerns over a global trade war troubled investors, lifting safe havens the yen and the Swiss franc.

Markets have been fixated on trade tensions as U.S. President Donald Trump slapped tariffs on top trading partners only to delay some of them for a month amid growing signs and fears of a U.S. economic slowdown.

That has led to investors losing faith in the U.S. economy which has been outperforming its peers.

On currency futures markets, investors have slashed net long dollar positions to $15.3 billion from a nine-year high of $35.2bn in January.

Risk-averse investors have sought the Japanese yen and Swiss franc instead sending both currencies to multi-month highs.

On Monday, the yen was 0.25% firmer at 147.68 per dollar, just below the five-month high of 146.94 it touched on Friday.

The Swiss franc hit a three-month high of 0.87665 per dollar on Monday.

The euro was steady at $1.0842 after clocking its best weekly performance since 2009 last week boosted by Germany's game-changing fiscal reforms, as Reuters reported.

The dollar index, which measures the U.S. currency against six others, was last at 103.83 on Monday, stuck near a four-month low touched last week.

The dollar fell more than 3% last week against major rivals, clocking its weakest weekly performance since November 2022 as investors fret about tariffs and its impact on the economy.

Adding to investor jitters, Trump in a Fox News interview on Sunday declined to predict whether the U.S. could face a recession amid stock market concerns about his tariff actions on Mexico, Canada and China.

Trump's comments sent U.S. stock futures lower, while the benchmark 10-year U.S. Treasury yields fell 3 basis points in Asian hours, weighing on the dollar.

"If Trump is looking to pursue a weaker dollar, lower yields ... then certainly that adds to this idea that maybe the dollar can't strengthen or can't move aggressively higher," said Parisha Saimbi, Asia-Pacific rates and FX strategist at BNP Paribas in Singapore.

"FX investors are in a broad de-risking mode."

Investors were also digesting data from Friday that showed U.S. job growth picked up in February, but cracks are emerging in the once-resilient labour market amid a chaotic trade policy.

Nonfarm payrolls increased by 151,000 jobs last month after rising by a downwardly revised 125,000 in January, the Labor Department's Bureau of Labor Statistics said.

Economists polled by Reuters had forecast payrolls advancing by 160,000 jobs after a previously reported 143,000 gain in January.

Citi strategists said the data should keep the Federal Reserve comfortable staying on hold at this month's meeting.

However, details of the jobs report, including a rise in the unemployment rate and a drop in participation, suggest the labor market could soften further this spring.

"The slowdown in consumer spending, upcoming government job loss and decline in equity prices will likely have the Fed cutting policy rates again in May," they said in a note.

Traders are pricing in 75 basis points of cuts from the Fed this year, LSEG data showed, with a rate cut fully priced in for June.

In other currencies, sterling touched a four-month high of $1.2946 before easing to $1.2911 in Asian afternoon.

The Australian dollar was 0.14% higher at $0.6315, while the New Zealand dollar last bought $0.5718.

In cryptocurrencies, bitcoin threatened to dip below $80,000 in Asian hours before inching away and was last at $82,297.82.

China's yuan slipped on Monday after data over the weekend showed consumer price index in February fell at the sharpest pace in 13 months.

The onshore yuan was trading at 7.2563 per dollar, 0.2% weaker, while its offshore counterpart was 0.24% weaker. 

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