Trump's commercial decisions shake the position of the dollar as a safe haven for markets

In light of the fall in US share prices this month, John Sidawi, director of funds at Fededed Hermes, noted an unusual phenomenon that caused his attention. Dollar, which has always been considered a safe haven in times of decline in markets, has not seen this time being recovered, despite the rabbit of investors looking for safe havens. On the contrary, it was also back, and at an accelerated rate with the flow of warm money to gold, yen and European stocks, almost assets except the American. Sidawi, who contributes to the investment oversight in the company, said: “It is unusual and has great indications. The dollar, in an environment that was supposed to play a role as a safe haven, does not play this role,” says Sidawi, who contributes to the supervision of the company’s mortgage investments. Donald Trump is the only explanation for this situation, as is the case with many fluctuations that have recently ruined global markets. Only two months after the beginning of his second term, he rose a barren, risen of customs duties and tried to withdraw time contracts of globalization, shaking the confidence in the US currency, which has had a distinctive position in the heart of the global financial system over the past eight decades. The dollar has dropped against the most important currencies. The dollar has fallen against almost all 31 currencies over the past three months, causing the ‘Bloomberg’ index of the dollar to fall by about 3%, at the worst start of the year since 2017. In contrast, the price of gold, a competitive safe haven, has risen to a record 3000 per grams. By mid -March, speculators for the first time since Trump chose to bet on the dollar, amid the fear that its political transformations would lead to the largest economy in the world in the direction of stagnation. “Instead of being a traditional stronghold of stability, and the first way out for foreign exchange market operators, the dollar is now completely contradictory,” says Michael Brown, the main strategic researcher in London at Peppersone Ltd, one of the largest brokerage companies in the foreign exchange market. He added that an increasing number of clients began to ask a question: “Where should I go instead of automatic dependence on the dollar as a resort?” However, this last decline did not significantly weaken the strength of the dollar; As he has increased a lot that was previously supported by the power of the economy and the high interest rates. It could regain its momentum if the fear of a global slowdown has caused a wave of purchase of US treasury bonds by foreign investors. It is still sturdy as a basic currency in the world, used in most central banking reserves, and to buy basic merchandise such as oil, to a large extent because of the lack of a real alternative yet. “The climbing of currencies and their landing is not taking place because there is an unpredictable president trying to eliminate globalization,” said Carmen Rinhart, a professor of economics at Harvard University and former economists at the World Bank. She added: “The dollar did not exceed the pound star overnight as a backup currency.” Reducing the dollar dependence, but Trump’s movements have revived old discussions about whether foreign governments will accelerate their efforts to reduce the dependence on the dollar. In Europe, officials in this have seen an opportunity to improve the role of the euro by creating more integrated and liquid markets, enabling the united currency to compete more strongly with the dollar. In the developing world, some countries were offered the idea of ​​a block from time to time to confront the dominance of the dollar. Trump expressed his desire to retain the role of the central dollar worldwide and threatened once to respond to any country trying to separate its trade from the US currency. At the same time, during his campaign, he expressed his welcome in a weaker dollar because it would make American products more competitive. It speculated that he could use his commercial war to push governments to end a major agreement that reached this goal, although the White House did not publicly suggest any of this nature. However, these two objectives, whether maintaining the status of the dollar or persuade other countries to act to serve the interests of the United States, do not appear to be in harmony with the isolationist Trump agenda and the approach to the allies. In a note I sent to the clients on Thursday, Rabobank, Jain Foley, said that Trump’s commercial policy, his withdrawal from military alliances and his spontaneous statements regarding the annexation of Canada or Greenland to the United States, all weakened in the United States in a way that could accelerate the rate of decipheres. Currency strategy, warned its clients this month that the possibility of losing the dollar to place it as a safe haven, while the markets must be adapted to the new geopolitical system, “must be recognized as an existing possibility. S&P 500 index fell by an extra 2% on Friday, after Trump imposed customs on foreign car manufacturing companies. Traders are now awaiting the plans to advertise on the second April, which it calls ‘Tahrir’s Day’, on what the biggest procedure can be so far, an extensive package of customs duties, based on its belief that the imposing barriers to imports will create by improving local production. Theoretically, the increase in customs duties should strengthen the currency by reducing the demand for imports and supporting local industrial production. But what happened is the contrary, as the dollar has decreased as a result of the great Trump thumbs, which threaten to promote inflation and slow growth. Officials in the US administration have reduced the importance of these problems; As a potential side effect of a program that includes reducing the number of government employees and reducing expenses, and ultimately aiming to revive the economy. This short -term pain is what is worried “Wall Street”. After one of the most powerful profits over the two years since the Internet registered in the 1990s, the S&P 500 index has fallen by 9% since the mid -February, influenced by fear related to the economy and high assessments of technology shares to the mutation of artificial intelligence. At the same time, Trump clashes with Europe, and Trump’s clashes with European allies set fire to the defense costs of a wave of spending by Germany that could improve the economy of the region. This is what this year has recovered in European shares to achieve profits in the category dozens, which could cause investors to transfer their money from the United States to Europe. “If these funds are displaced with people, the geopolitical and economic foundations of the United States begin to question, imbalances leading to a decline in the US share and the dollar market may have occurred,” says Thierry Wizmann, a strategic expert on the Macquarie group in New York. Paris Igkrin, economist at the University of California, Berkeley, which was expanded on the dollar, focused on long -term risks. He pointed out that the role of the Central American currency, which enabled the country to avoid the debt crises seen by other countries thanks to maintaining the demand for treasury bonds, will not be easy to overcome, as the size of the US debt market makes it the most liquid in the world, which allows investors to spread large quantities. However, he said it could not be excluded. He added, “The dollar has not lost his position as a safe haven,” but he added: “We must take this possibility seriously.”