- US dollars and Treasurys are selling off as President Donald Trump's trade war increases risk for American assets.
- Investors are uneasy about Trump's policy changes and moving their money from US assets to classic safe havens.
- The euro has hit a three-year high against the dollar, benefiting from the 'Sell America' trend.
Dollar and Treasurys are selling off on Friday as President Donald Trump's trade war ratchets up the risk for American assets.
The US Dollar Index — which measures the greenback against a basket of major currencies — fell below the key 100 level for the first time since July 2023. The index chalked up 2.7% in losses over the past week and is 7.6% lower year to date.
Meanwhile, Treasury yields have risen, which means that prices of the assets have fallen because the two metrics move in opposite directions. The 10-year Treasury yield is around 4.45% — up nearly five basis points.
The spike in bond yields — which typically indicates higher interest rates — helped prompt Trump to put a 90-day pause on most tariffs.
The slump in the greenback and Treasurys is significant because they are typically considered safe assets that investors flock to in times of uncertainty. Treasurys are considered risk-free.
In contrast, investors are putting their money into classic haven assets elsewhere, like the Japanese yen, the Swiss franc, and gold.
Some analysts are calling the sell-off in the dollar, Treasurys, and US equities the "Sell America" trade.
'Sell US' to move away from 'Ground Zero'
"There has been a pronounced 'sell US' vibe flowing through broad markets and into the classic safe-haven assets, with the USD losing the safe-haven bid put in over the past week," wrote Chris Weston, the head of research at Pepperstone, an Australian foreign exchange broker.
The dollar's steep losses signal that many investors are focusing on the idea that "Trump's reluctant pause on tariffs was due to increased system risk and migrating capital away from Ground Zero," Weston wrote on X on Friday.
Even though Trump's pause on most tariffs for 90 days sent markets into a stunning rally on Wednesday, the gains came off quickly on Thursday, showing investors' jitters about ongoing macro uncertainty.
The unusual pattern of higher long-term interest rates and sharply lower stock prices suggests a "generalized aversion to US assets in global financial markets," wrote ex-Treasury Secretary Larry Summers, on X on Wednesday.
"We are being treated by global financial markets like a problematic emerging market," Summers wrote.
The euro hits a 3-year high against the dollar
Movement in the yen reflects investor unease as the currency was trading around 146 through the tumult.
The trade suggests that the US's "flip-flopping of policy is now demanding a higher risk premium of US asset markets," wrote Chris Turner, the global head of markets at ING, in a Thursday note. The dollar was trading around 143 to the yen on Friday.
The unusual market movements come amid unprecedented tumult sparked by Trump's trade war that is shaking confidence in the central role of the dollar in the global financial system — a position that others are also eying.
"The big element of constancy in US policy of the past decades is the attachment to the central role of the dollar. I believe that the Trump administration also has that view, but it is very incoherent in the way it practices that," Francois Villeroy de Galhau, the French central bank governor and a policymaker at the European Central Bank, told France Inter radio on Thursday. "What has happened in recent days and weeks plays against the confidence in the US currency."
However, this can be positive for developing the international role of the euro, Villeroy said.
ING's Turner wrote that euro assets could benefit if the "Sell America theme" unfurls fully.
On Friday, the euro hit a three-year high against the dollar.
