Tariff turmoil leaves investors with few hiding places

By Amanda Cooper and Yoruk Bahceli

LONDON (Reuters) - Investors are dumping U.S. assets they usually favour successful times of turmoil arsenic fearfulness implicit the economical interaction of U.S. President Donald Trump's reciprocal tariffs shakes assurance successful accepted safe-havens.

The dollar and U.S. Treasuries person taken a beating arsenic Trump's tariffs, positive a 104% work connected China, took effect, portion China swiftly retaliated. In contrast, safe-haven favourites specified arsenic golden and the Swiss franc proceed to propulsion successful cash.

The accelerated emergence successful U.S. Treasury yields has disquieted investors, who fearfulness this could beryllium forced selling to screen portfolio losses and a dash for cash, rekindling memories of the COVID-19 marketplace turmoil.

Here is simply a glimpse astatine however accepted harmless havens person fared truthful acold during the tariff turbulence:

The dollar was the archetypal to suffer its radiance aft Trump announced tariffs, erstwhile it dropped on with banal markets. This was an antithetic determination raising questions astir the planetary lasting of the U.S. currency, often dubbed "King Dollar" for its spot and dominance successful planetary currency markets.

The dollar has shed much than 5% this twelvemonth against a handbasket of different currencies aft posting its weakest commencement to a twelvemonth since 2016, LSEG information shows.

The dollar's nonaccomplishment to payment from rising U.S. Treasury yields has added to investors' worries because, until now, higher returns connected Treasuries comparative to different enslaved markets had boosted the dollar's appeal.

"The dollar not getting enactment from (higher) yields suggests the dollar is not a currency safe-haven," State Street Global Markets' caput of macro strategy Michael Metcalfe said.

Investors initially rushed into authorities bonds connected heightened recession risks, but that has rapidly changed.

After plunging 26 ground points past week, U.S. 10-year Treasury yields person surged much than 40 ground points truthful acold this week. Longer-dated bonds are the worst hit, with 30-year yields up astir 50 bps, acceptable for their biggest play leap since the aboriginal 1980s. Bond yields emergence erstwhile prices fall.

An scale of Treasury volatility has risen to its highest since precocious 2023.

Yields person surged adjacent arsenic traders terms successful faster U.S. Federal Reserve complaint cuts, suggesting deliberate dumping of Treasuries alternatively than selling driven by changes successful economical expectations. This is reflected successful a widening spread betwixt Treasury yields and involvement complaint swaps, derivatives utilized for hedging.

Pepperstone elder strategist Michael Brown said that pointed to a existent deficiency of tendency to clasp Treasuries.