Dollar Holds Breath as Trade Tensions Ease, But Safe Havens Are Still Where It's At

The U.S. dollar has been on a rollercoaster ride this month, with trade tensions easing temporarily to give the greenback a brief reprieve. But don’t be fooled—this is no victory lap for the buck. Underneath the surface, structural forces are pushing the dollar lower, while safe-haven assets like the yen and gold are quietly setting up for big gains. Let’s break it down.

The Tariff Truce: A Bumpy Rally for the Dollar

The April 9th announcement of a 90-day tariff pause sent markets soaring, and the dollar followed suit—temporarily. But as investors dig deeper, they’re seeing this “truce” for what it is: a tactical pause, not a peace treaty. . While the DXY briefly rallied, the bigger picture remains bearish. The Fed’s stuck at 4.5% rates, tariffs are still cranking up inflation (March’s retail sales jumped 1.4%!), and global investors are fleeing the dollar like it’s a sinking ship.

Why the Dollar’s Days Are Numbered

The research is clear: tariffs are a net negative for the U.S. economy. They’re inflating prices, eroding trade credibility, and forcing global investors to rebalance portfolios. Even a 10-20% increase in hedging against the dollar could trigger $2–$3 trillion in dollar selling—enough to sink the DXY further. The yen, franc, and gold are all standing in the shadows, ready to capitalize.

The Yen’s Turn to Shine

The Japanese yen has become the new king of safe havens. Why? Because when the dollar’s reliability falters, investors flock to what’s stable—and the yen is delivering. . Even with quantitative models briefly turning negative on the yen (due to overbought conditions), its fundamentals—low yields, deflationary pressures, and safe-haven demand—are too strong to ignore. This isn’t a sprint; it’s a marathon. Stay long the yen until the tariff chaos clears.

Gold: The Fed’s Independence Crisis

Gold’s on fire, and it’s not just about inflation. Investors are panicking over political threats to the Fed’s independence. When the Fed’s credibility is under attack, gold becomes the ultimate hedge. . The metal’s rally isn’t done—expect it to hit $2,500 an ounce if the Fed can’t cut rates soon.

The Fed’s Dilemma: Stuck at 4.5%

The Federal Reserve is in a bind. They can’t cut rates because tariffs are keeping inflation volatile, but high rates are choking growth. This limbo is great for gold, bad for the dollar. If the Fed blinks and eases too soon, the dollar tanks. If they wait, the economy sputters—and the dollar still tanks. It’s a lose-lose.

What to Do Now

1. Short the Dollar: The DXY is heading lower. Use inverse ETFs like UDN or bet on commodity currencies (e.g., Norwegian krone, Australian dollar) that thrive when the dollar weakens.
2. Go Long the Yen: Buy yen-linked ETFs like FXY or consider Japanese stocks (e.g., Toyota, Sony) for double exposure to currency gains and corporate rebounds.
3. Hoard Gold: Physical gold, gold miners (e.g., Newmont, Barrick), or ETFs like GLD are all winners here.

The Bottom Line: Structural Shifts Favor Safe Havens

The dollar’s decline isn’t a blip—it’s a 15%+ two-year slide driven by global rebalancing. Even a temporary tariff truce can’t change that. Meanwhile, safe havens are delivering: the yen is up 8% year-to-date, gold is up 12%, and the Swiss franc’s holding its ground despite SNB interventions.

Investors: This isn’t about being right for a week—it’s about riding the structural waves. The dollar’s days as the world’s top safe haven are over. The yen and gold are where the smart money’s going. Don’t fight this trend.

Data as of April 2025. Past performance does not guarantee future results.