FOREX-Dollar slides with investor confidence shaken in safety of US assets

By Chibuike Oguh and Lucy Raitano

NEW YORK/LONDON, April 11 (Reuters) - The dollar continued to slide against major currencies on Friday as the back-and-forth over import tariffs shook investor confidence in the safety of the greenback, sending it to its lowest level in a decade against the Swiss franc and a three-year low versus the euro.

China increased its tariffs on U.S. imports to 125% from 84% on Friday, retaliating against U.S. President Donald Trump's decision to hike duties on Chinese goods to a total of 145% after pausing many of his latest tariff hikes on most countries.

The dollar has been hit hard by a global selloff that spread to stocks and even safe-haven U.S. Treasuries. The yields on benchmark 10-year notes US10YT=RR are on course for their biggest weekly jump since 2001. MKTS/GLOB

Brad Bechtel, global head of FX at Jefferies, said dollar weakness is being driven partly by the view that U.S. economic exceptionalism is waning - with the potential of a looming recession - and a switch from the dollar as a safe-haven asset to the yen and Swiss franc.

"There's a great rotation, which is basically foreign investors diversifying away from the U.S. into other regions such as the euro zone. And for those foreign investors still involved in the U.S., they're realizing they need to currency hedge their assets. There's a scramble to do so, which is putting additional pressure on the dollar."

Data on Friday showed U.S. consumer sentiment deteriorated sharply in April while 12-month inflation expectations surged to the highest level since 1981 amid unease over the trade tensions.

On Wall Street, the benchmark S&P 500 .SPX, Dow Jones Industrial Average .DJI and the Nasdaq Composite .IXIC indices edged higher after losing ground earlier in the session. They were set to end higher in a week marked by topsy-turvy developments in the global trade war.

The dollar was down 0.9% at 0.81650 against the Swiss franc CHF=EBS, extending losses in the previous session when it plunged to its lowest level since January 2015. It is on track for its biggest weekly drop since November 2022.

The greenback JPY=EBS was down 0.51% at 144.05 yen after hitting its lowest level since September 2024. It is set for its largest weekly drop since early February.

Gold soared past $3,200 an ounce, hitting a fresh new high supported partly by the dollar weakness. Spot gold XAU= rose 1.75% to $3,229.46

'LOSS OF CONFIDENCE'

European Central Bank President Christine Lagarde on Friday said her central bank was ready to deploy its instruments to maintain financial stability and that it had a solid track record in devising tools when required to deal with turbulence.

The euro surged 1.25% to $1.134050, after hitting its highest level since February 2022. It is on track for its biggest weekly gain since early last month.

The single currency also rose 0.43% against the pound EURGBP=D3 in a sign of its outperformance. The pound was up 0.89% against the dollar, at $1.30825. GBP=D3

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.56% to 99.958 - hitting its lowest mark since April 2022. It is on track for its biggest weekly drop since early last month.

China's yuan fell sharply against the euro, which hit an 11-year high against the currency in the offshore market.

This week, the Chinese currency fell to its weakest level on record against the dollar, both onshore and offshore, though it has since rebounded. The dollar was last down 0.45% against the offshore yuan at 7.2807. CNH=D3

"Part of the dollar weakness in the past few weeks has been linked to worries over a recession or the Fed cutting rates, but it's kind of gone beyond that," said Win Thin, global head of markets strategy at Brown Brothers Harriman in New York.

"It's more really loss of confidence and credibility in the dollar and then in U.S. policymaking. Typically in risk-off episodes, the dollar should gain as a safe haven, but it's really been the yen and Swiss franc that have been picking that up, and the dollar has been under pressure."