Context:

After a tumultuous year, perceptions of safe-haven currencies, particularly the U.S. dollar, Swiss franc, and Japanese yen, are shifting as these currencies face notable volatility. The dollar, once a stronghold during crises, has weakened sharply due to erratic trade policies and political pressures, losing approximately 9.37% in 2025 alone. Conversely, the Swiss franc has gained around 13% against the dollar, yet its rising value complicates monetary policy amid low inflation. The yen has fluctuated significantly, prompting speculation about potential government intervention. Moving forward, the Swiss National Bank may need to address the franc's strength to safeguard its export-driven economy, while the dollar's future remains uncertain amid ongoing political turbulence.

Dive Deeper:

• The U.S. dollar index plummeted 1.3% on January 29, marking its lowest level in nearly four years, reflecting a broader decline of 9.37% throughout 2025.

• Donald Trump's 'One Big Beautiful Bill Act' has contributed to investor concerns about the dollar's sustainability, as noted by Swiss bank Julius Baer.

• The Japanese yen's value fluctuated around 156 to 150 against the dollar throughout 2025, but weakened significantly after Prime Minister Sanae Takaichi's expansionary fiscal policies were implemented.

• The Swiss franc has reached an 11-year high against the dollar and euro, yet its strength poses risks of disinflation in Switzerland's sluggish economy, where inflation is at just 0.1%.

• The Swiss National Bank (SNB) has indicated readiness to intervene in forex markets to stabilize the franc, though UBS forecasts limited reactions due to a lack of deflation risks.

• Analysts suggest that the dollar and yen's status as safe-haven currencies has been damaged, with the franc emerging as the preferred choice amid recent market uncertainties.

• Economic forecasts indicate that the dollar could regain some strength against the franc by April, with expectations of a 2.2% recovery.