Safe havens yen, Swiss franc surge as Trump's tariffs hit dollar

Summary:

• Australian dollar sinks to five-year low
• Safe havens yen, Swiss franc surge
• Dollar languishing near six-month trough

Investors sold the dollar and poured into safe havens like the yen and Swiss franc on Monday after US President Donald Trump unleashed sweeping tariffs on the world.

Pro-growth currencies like the Australian and New Zealand dollars were not spared in the market rout that battered risk assets and wiped out nearly $6 trillion in value from US stocks last week, on mounting fears of a global recession, particularly in the United States.

The Aussie was last down 0.73% at $0.6001, having tumbled to a five-year low earlier in the session, while the kiwi slid 0.75% to $0.5554.

More than 50 nations have reached out to the White House to begin trade talks and China said on Saturday "the market has spoken" in rejecting Trump's tariffs.

China had on Friday struck back with a slew of countermeasures including extra levies of 34% on all US goods and export curbs on some rare earths.

The dollar was down 1.3% against the yen at 144.95 in volatile early trade on Monday, languishing near a six-month low and extending its nearly 2% slide against the Japanese currency last week.

The Swiss franc jumped more than 1% to 0.85095 per dollar, having also surged 2.3% against the greenback last week.

The two safe haven currencies have emerged as significant winners in the aftermath of Trump's latest tariff salvo. Assets like government bonds and gold have also risen on safety bids.

"The big theme has been selling USD/JPY because it's a good US recession proxy and it's a good US yields proxy and US yields tanked," said Brent Donnelly, president of market maker and analytics firm Spectra Markets.

While the dollar is also typically known to be a safe haven asset, that status seems to be eroding as uncertainty over tariffs and concern over their impact on US growth intensify.

The euro was up 0.26% at $1.0994 in Asia, while sterling eased 0.13% to $1.2889.

Against a basket of currencies, the dollar fell more than 0.4% to 102.48, having tumbled 1% last week.

"Given the US is at the epicentre of the trade war, the USD has been suffering from outflows" with investors "looking ... to diversify away from US assets," said Rodrigo Catril, senior FX strategist at National Australia Bank.

Traders have ramped up bets of more Federal Reserve rate cuts this year on the view policymakers would have to ease more aggressively to shore up growth in the world's largest economy.

Futures point to 100 basis points worth of rate cuts priced in by December this year, while Fed Chair Jerome Powell cautioned on Friday it was still too soon to know what the right response from the central bank ought to be.

The focus for Asia on Monday will also be on the yuan midpoint fixing by China's central bank for clues on whether Beijing could tolerate a weaker currency as Sino-US trade tensions escalate. Chinese markets were closed on Friday for a holiday.

The offshore yuan was last little changed at 7.2861 per dollar, ahead of the open of trade for its onshore counterpart.