safe haven currencies: Amid uncertainty over US dollar due to Donald Trump’s policies, these currencies can be a safe haven

Economic uncertainty across the globe has led to fluctuations in the currency markets, and there is still no clear understanding among analysts regarding which currencies are likely to become stable haven assets.

Recent events, including the US tariff wars with Canada, Mexico, and China, the pause in American military aid to Ukraine, and changing global defense spending priorities, have only made the situation worse, as per CNBC. These factors are being watched very closely by market participants to see how they will impact foreign exchange rates in the coming months.

British pound and Japanese yen attract investor interest

Some pundits believe that the British pound and Japanese yen may profit from the existing economic conditions. Jane Foley, the head of FX strategy at Rabobank London, told CNBC that the British pound may continue to perform well, especially when paired against the euro. She pointed out that the modest trade surplus between the UK and the US makes it less likely to face American tariffs.

Foley pointed out that Japan has made a lot of investments in the United States and is the leading foreign investor in the country, which plays in favor of the yen. The current Japanese Prime Minister Shigeru Ishiba has promised to increase the investment stream to the United States, and the Japanese defense budget is spent almost entirely on the purchase of military equipment from Washington. These factors, along with the fact that the Bank of Japan is tightening its policy, have positively affected the yen, which has appreciated by 5 percent against the US dollar since the beginning of the year.

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The US dollar is no longer the sole safe haven

As such, the US dollar has always been considered the king of safe-haven currencies, but some analysts say that some policy measures may erode that position. David Roche of Quantum Strategy warned that the United States is losing its legitimacy as a global power as it changes its position on foreign policy, most notably with Ukraine. He predicted that geopolitical risks may deprioritize the yen as a risk avoidance tool for investors.

However, there are others who think that the dollar may continue to appreciate. Christian Mueller-Glissmann of Goldman Sachs explained that although the dollar has declined recently, there is room for further appreciation of the currency as the global economy adjusts its policies. In the meantime, Dominic Schnider, an analyst at UBS, has argued that the Swiss franc is losing its safe haven status as investors look for higher returns in the Australian dollar and the British pound.

Investors seek stability amid trade tensions and monetary shifts

As things unfold with respect to trade tensions and monetary policy changes, the search for stability in the currency market continues. Because of the many factors at work, it will be important to watch how investors react to determine which currencies ultimately become safe havens in an environment of increasing economic uncertainty.

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FAQs

1. Which currencies are considered safe havens amid market volatility?
   The British pound and Japanese yen are gaining attention as stable currencies, with analysts suggesting that Japan’s economic policies and investment ties with Washington could strengthen the yen’s position as a safe-haven asset.

How are Trump’s tariffs impacting global currency markets?
Trump’s tariffs on Canada, Mexico, and China have added to market uncertainty, leading to shifts in currency values. While some experts believe the dollar’s dominance may weaken, others argue that the euro and Swiss franc could also see varying effects.