The Shift in Safe Havens: US Dollar Loses Its Shine

Amid a global economic slowdown, investors typically flock to safe haven assets such as gold and the US dollar. However, the dollar is now losing its appeal as a safe refuge. This shift is largely driven by economic tensions stemming from a trade war initiated by US President Donald Trump, prompting many to reduce their reliance on the greenback, according to Indonesia's Finance Minister, Sri Mulyani Indrawati.

Sri Mulyani noted that Japan's yen and Europe’s euro have now become the preferred safe haven assets among market participants. As of April 28, 2025, the yen had strengthened by 9.3% against the US dollar, while the euro gained 9.1%.

In contrast, the Indonesian rupiah weakened by 4.5%, and even the US dollar itself has contracted by 8.5% year-to-date. Meanwhile, China’s yuan managed to post a slight gain of 0.1%.

“Today, euro and yen are considered safe havens. That doesn't mean they're immune to risk, but we must continue to monitor and maintain stability,” Sri Mulyani stated during a press briefing on the state budget in Jakarta, Monday (May 5, 2025).

She explained that the dollar is under pressure primarily due to uncertainties originating within the US. Besides the trade war triggered by Trump through high reciprocal tariffs on major trading partners, further instability was created by his conflict with US Federal Reserve Chair Jerome Powell.

“Trump even dubbed Powell ‘Mr. Too Late’ because he wanted interest rates to drop to boost economic growth,” Sri Mulyani said.

This ongoing friction between the executive branch and the central bank has heightened uncertainty across financial markets, affecting interest rates, US Treasury yields, and weakening the dollar.

The US dollar is now experiencing one of its worst performances in modern presidential history. According to Refinitiv, the dollar index has fallen 9% since Trump’s second inauguration on January 20, 2025, through April 25. In April alone, the index dropped by over 4.5%—marking the steepest monthly decline since at least 1973.

The index reached 98.12 on April 21, 2025—its lowest point since March 2022. Trump's aggressive tariff policies have driven investors to shift funds away from the US, leading to a weaker dollar while boosting the euro, Swiss franc, yen, and gold—all of which have risen more than 8% against the dollar.