In Singapore, the yen and Swiss franc, considered safe-haven currencies, maintained their positions near six-month highs on Tuesday. The U.S. dollar, on the other hand, faced widespread losses due to growing concerns about a potential recession following President Donald Trump's implementation of tariffs.
Currency markets appeared fragile yet relatively calm during early Asian trading. In the past 24 hours, the dollar fluctuated significantly against safe-haven currencies, reflecting traders' uncertainties regarding an escalating trade conflict.
Global stocks have experienced a decline since Trump's tariff announcements, triggering retaliatory measures from China and the European Union. In response, Trump threatened to impose even higher tariffs, further heightening market tensions.
Investors have shown a preference for the Japanese yen and Swiss franc in light of the recent market instability, seeking refuge in these traditional safe havens.
The yen traded slightly stronger at 147.61 against the dollar, close to the recent six-month high of 144.82. The Swiss franc also remained strong at 0.858 per U.S. dollar, near a six-month high from the previous session.
Despite its usual safe-haven status, the dollar's status may be weakening due to uncertainties surrounding tariffs and their potential impact on U.S. economic growth.
The euro and sterling both saw gains in early trading, with the euro climbing 0.38% to $1.0944 and sterling up 0.3% at $1.2765. Market volatility has been attributed to the policy decisions of the Trump administration and could potentially reverse if these policies change.
Investors are predicting a higher likelihood of U.S. interest rate cuts as early as May in response to the increased risk of an economic downturn. This expectation, along with anticipated easing later in the year, may diminish the dollar's yield advantage.
The dollar index, measuring the currency against six others, was down 0.3% on Tuesday and has decreased by 1% since the tariff announcements last week.
Chicago Federal Reserve Bank President Austan Goolsbee highlighted concerns from businesses regarding tariffs but emphasized the importance of examining hard data before taking any policy actions.
Kevin Gordon, senior investment strategist at Charles Schwab, expressed doubts about aggressive rate cuts from the Fed as a solution. He questioned the availability of typical monetary or fiscal stimulus usually seen during market downturns.