The dollar plunged Thursday, with the cost of hedging against further slides climbing to the highest since the Covid pandemic shuttered cities in early 2020.
Markets expect more dollar weakness, with the Bloomberg Dollar Spot Index down 1.5% at the end of trading in New York Thursday, the biggest daily tumble since 2022. Investors moved out of Latin American currencies and into havens like the Swiss franc and the Japanese yen.
The options premium paid to hedge against a decline in the US currency against a basket of peers over the next week reached the highest since March of 2020, relative to positioning for gains. As economic worries intensified, traders boosted bets on deeper interest-rate cuts by the Federal Reserve by year-end. Stocks tumbled anew as the White House said US tariffs on China rose to 145%.
“The aftermath of new tariffs on China has brought back a flight to safe havens,” said Jayati Bharadwaj, a currency strategist at TD Securities. “The dollar is falling over reduced expectations around US growth and growing calls for Fed cuts and general flows away from US equities into other global markets.”
The $7.5 trillion-a-day currency market has been on edge since Donald Trump’s return to the White House and his on-again, off-again announcements on tariffs. The dollar gauge is down for a third day in a row and has lost about 6% since its February peak.
The Swiss currency rallied about 4% to trade at 0.8254 per dollar, its biggest jump since 2015, when the nation’s central bank surprised investors by abandoning the currency’s cap against the euro. The yen advanced more than 2%.
“The Swiss franc is gaining on the safe-haven bid, given the uncertainty in the market around tariffs,” said Brad Bechtel, global head of foreign exchange at Jefferies Financial Group Inc. “Most asset managers are using the franc and yen as risk-hedge proxies.”
The Brazilian real fell 1.1% against the dollar, the worst performer in emerging-markets, while the Mexican peso slid about 0.9%. The South African rand, often a proxy for risk sentiment due to its liquidity, dropped 0.4% as of 4.14 pm in New York.
Written by: Anya Andrianova — With assistance from Giovanna Bellotti Azevedo and George Lei @Bloomberg
The post “ Dollar Slides by Most Since 2022 as Traders Gird for More Losses” first appeared on Bloomberg