The US Dollar suddenly looks like the emperor with no clothes
No surprise here — Asian equities are diving headfirst into the plunge tank, tracking Wall Street’s carnage but not quite tick for tick. Offloading high-beta, high-export exposures across the region isn’t just a reactive move — it’s a live, high-conviction trade. This isn’t some one-day wobble — it’s a coordinated, cross-asset risk dump with real momentum. The message couldn’t be more unmistakable: risk is being slashed without mercy, and the tape’s still bleeding.
The dollar’s taking it on the chin again as FX markets ramp up pricing for a deeper U.S. recession and a forced Fed pivot. The yen comfortably wears its safe-haven crown, catching a steady bid on every tick lower in US equities.
With U.S. exceptionalism losing its lustre fast and 10-year Treasury yields breaking below 4%, the euro is emerging as a major winner in the tariff sweepstakes. Europe still has stimulus on deck, while Washington is busy swinging the fiscal axe. That divergence is no longer just a macro idea — it’s the trade.
High-beta G10s like AUD and NZD are hanging in there for now, but they’re skating on thin ice. Weakening global growth, US recession signals, fading commodities, and broad-based de-risking will eventually drag them down once the next volatility wave hits. This is the FX reversion trade waiting in the wings.
Bottom line: this is still a sell-the-dollar rally tape. Long JPY and EUR remain the cleanest expressions of U.S. economic fragility. As recession risks escalate, so does the fear that global capital pulls back from U.S. assets. Without credible fiscal stimulus or a policy anchor, the dollar’s losing its safe-haven luster — starting to look more like the emperor with no clothes, stripped down and exposed to the macro storm.
Author
Stephen Innes
SPI Asset Management
With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.
