The US dollar fell at its sharpest pace in three years, while the cost of hedging against further declines jumped to its highest levels since the COVID-19 pandemic in early 2020.
The overall weakness in the US currency continued during Asian trading on Friday, with the Bloomberg Dollar Index ending Thursday's trading in New York down 1.5%, its biggest daily loss since 2022.
Investors moved away from Latin American currencies toward safe havens such as the Swiss franc and the Japanese yen, while the euro and pound also benefited from this shift.
The Swiss franc rose about 4% on Thursday to 0.8254 against the dollar, its biggest jump since 2015, when the Swiss National Bank surprised markets by abandoning its cap on the currency against the euro. The Japanese yen also advanced more than 2%.
The euro jumped 3.48% against the U.S. dollar to 1.13, while the pound sterling traded higher 3.68% to 1.30 against the U.S. currency.
"US assets are clearly underperforming amid the uncertainty surrounding tariffs and growing concerns about the US economic outlook," said Felix Rein, an analyst at ANZ Banking Group in Sydney. "So far, the European currency and safe havens have been the biggest beneficiaries."
The cost of options used to hedge against a dollar decline against a basket of rival currencies over the coming week rose to its highest level since March 2020, compared to the costs associated with betting on gains.
Amid mounting economic concerns, traders increased their bets on deeper interest rate cuts by the Federal Reserve by the end of the year. Stocks fell again after the Trump administration announced a 145% increase in tariffs on China.
The global currency market, which trades at $7.5 trillion a day, has been in a state of tension since Donald Trump returned to the White House and his erratic announcements on tariff policies. The dollar index has lost more than 6% since its February peak and was down about 0.3% on Friday.
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