FX alert: Safe havens running out of road

Hawkish hangover or dovish dawn

The Treasury curve is climbing again, long-end first, like a slow but relentless tide that lifts every hull, whether seaworthy or not. Two, three basis points higher may not sound like much, but stack them on top of yesterday’s move and suddenly the entire yield structure feels heavier. Growth keeps humming, inflation whispers in the background, and traders are forced to recalibrate their bearings—compasses twitching as term premium seeps back into the mix.

For the yen, it’s been another session of taking punches it can’t quite dodge. Higher U.S. yields have the dollar striding forward like a boxer dictating the ring, and Japan’s political kabuki only adds fuel. Sanae Takaichi stepping into the spotlight as a contender for the LDP crown is no small headline: the first woman in the role would mark a break in Tokyo’s choreography. She wears the legacy of Abeconomics like a faded campaign badge—close enough to the old guard to stir memories, yet new enough to carry her own script. The market hears “continuity with a twist,” and that’s not a mix the yen is ready to rally on.

Europe’s single currency has its own ghosts to battle. The euro is leaking lower, not because of a catastrophe, but because the long books are being trimmed after jobless claims in the U.S. reverted to strength. At the same time, the Philly Fed lit up the screens—though with the curious footnote of plunging price-paid subindices. That detail tells traders there’s still a soft landing case to cling to, and when the narrative leans toward resilience, U.S. data takes on the glow of inevitability. Payrolls may well deliver a seasonal bounce, and if so, those euro longs will find themselves further underwater.

The Fed itself tried its best to sound dovish, paring rates and sprinkling “risk-management” language across the wires. But the market already knows that the bullet’s been fired. Forecasts still assume a soft landing, and the dots suggest only modest easing. Traders, though, are already pencilling in more: another 50bp by December, over a full point by end-2026. Yet here we are, with the two-year yield almost exactly where it was pre-FOMC, a sign that expectations haven’t really budged. The desk chatter boils down to this: the Fed may want to go gently, but the market expects the axe to fall harder once labor cracks widen—or once politics shoves Powell off stage and a Trump-aligned Fed takes the chair.

And then there’s the question of safety—where to hide when storms loom. Once upon a time, Germany and Japan were the sturdy bunkers for bond money. But rising long-end yields have stripped them of that halo. Investors scanning the landscape for havens find fewer doors open: Swiss bonds are bid to oblivion, and gold is flashing its old allure, climbing as if it remembers its ancient role as the only asset immune to political theatre and paper dilution.

The game board is shifting. Yields higher, havens thinner, currencies caught between politics and data. The dollar might not soar, but it no longer looks like it’s sinking. Traders will soon return to an old truth: when the bond market seas get rough and the maps blur, gold still speaks louder than promises.

All of which leaves the dollar in a curious limbo. A relief rally? I think so, but it’s 5:30 a.m. in Bangkok, and the glow on my trading screens is about to go blank. The market is stuck in that hazy in-between—hawkish hangover or dovish dawn—but I’ll let that argument wait until Monday. For now, it’s about recharging batteries( on the golf course hopefully), not just for the laptop but for the trader who’s been riding every tick of this pre- and post-FOMC whipsaw storm.