Currency Markets Shift as Dollar Weakens and Safe-Haven Flows Rise

The foreign exchange market is undergoing a significant realignment, driven by U.S. trade policy uncertainty, economic growth concerns, and rising geopolitical tensions. As of April 28, 2025, major currencies are displaying sharp movements, while emerging markets are feeling the pressure from both domestic instability and shifting global demand.

Dollar Under Pressure as Economic Outlook Dims

The U.S. dollar has seen a sharp decline in April, falling more than 4% against both the euro and the yen—its worst monthly performance in over two years. The decline has been fueled by growing concerns about U.S. trade policies under President Trump and lingering doubts over the resilience of the U.S. economy. Investors are awaiting critical data releases, including the April jobs report and first-quarter GDP figures, to assess whether the Federal Reserve might pivot its stance (source).

Some analysts, including those at the Financial Times, warn that the dollar’s weakness could deepen, forecasting a potential depreciation of 25–30% based on historical patterns and the current macroeconomic landscape (source).

The softer greenback has spurred renewed flows into alternative currencies, while also boosting commodity prices such as gold and oil, which are traditionally dollar-sensitive.

Euro, Yen, and Emerging Market Currencies React

The euro has strengthened against the dollar, trading between 1.08 and 1.12. BNP Paribas recently revised its 12-month EUR/USD forecast to 1.15, citing improved growth prospects in the eurozone and a weaker demand for U.S. assets (source). Political stability and the European Central Bank’s cautious policy approach have made the euro increasingly attractive to investors seeking safer assets.

The Japanese yen has similarly appreciated, benefiting from its reputation as a safe-haven currency during times of market turmoil. Although media reports suggested U.S. officials were pushing for a stronger yen, Japanese finance leaders have firmly denied such negotiations took place (source).

Meanwhile, the Chinese yuan has shown signs of stabilization. The People’s Bank of China set the USD/CNY midpoint at 7.2043, slightly stronger than expected, suggesting Beijing’s intent to maintain stability amid sensitive trade discussions with the United States (source).

Emerging market currencies have faced mixed fortunes. Brazil’s central bank announced a rollover of $18.4 billion in currency swaps to protect the real against heightened volatility (source). In Turkey, the lira briefly hit a record low of 42 against the dollar following political unrest but has since rebounded slightly to around 38, though investor sentiment remains fragile (source).