Rabobank analysts suggest the U.S. dollar’s safe-haven status is facing headwinds due to escalating budget deficits and international trade disputes. Diminished investor confidence is bolstering alternative safe-haven currencies, such as the Swiss franc and Japanese yen, indicating a potential shift away from U.S. dollar-denominated assets. According to FX analyst Jane Foley, the recent underperformance of the U.S. Treasury market and the dollar as safe havens has disrupted established market dynamics and eroded the perceived benefits of U.S. exceptionalism. Concerns are mounting that sustained increases in U.S. Treasury borrowing costs, coupled with a substantial budget deficit (6.4% of GDP last year), could negatively impact the U.S. economy. While the dollar’s prominence in global payments could still trigger increased demand during a market credit event, current market flows appear to be driven by anxieties that tariff-related developments are impeding corporate America’s growth prospects. These concerns are compounded by apprehensions that the current administration’s isolationist policies have damaged the nation’s international standing.
