Safe-Haven Currencies Weaken as U.S.-China Trade Hopes and Fed Clarity Spark Risk Appetite

Safe-haven currencies like the Japanese yen and Swiss franc weakened in Wednesday’s Asian session, with USD/JPY up 0.4% to 142.15 and USD/CHF rising 0.6% to 0.8236, as hopes for easing U.S.-China trade tensions ignited risk appetite. U.S. Treasury Secretary Scott Bessent’s optimistic remarks and President Donald Trump’s pledge to retain Federal Reserve Chair Jerome Powell have shifted market sentiment, pressuring haven assets. As the $6 trillion-a-day forex market leans risk-on, here’s why safe-haven currencies are losing ground.

Haven Currencies Lose Appeal

The Japanese yen and Swiss franc, traditional safe-haven stalwarts, pared gains or declined as risk sentiment improved. The USD/JPY pair climbed to 142.15, extending a 1% gain from Tuesday, while USD/CHF hit 0.8236, per FactSet data. CIMB’s Treasury and Markets Research team attributes the shift to U.S.-China trade optimism, per a research note. Posts on X highlight a 0.3% yen drop after Trump’s Fed comments, with traders eyeing USD/JPY resistance at 145. “Havens are out of favor today,” says Priya Lim, a 30-year-old forex trader in Singapore.

U.S. Treasury Secretary Scott Bessent’s statement that the 145% U.S. tariffs on Chinese goods are on a “de-escalatory path,” despite pending formal talks, lifted markets, per Reuters. Trump’s Tuesday assurance that he won’t fire Fed Chair Jerome Powell, per Bloomberg, eased fears of Fed interference, further fueling risk-on moves. The dollar index rose 0.1% to 99.06, recovering from a three-year low of 97.85, per Investing.com, pressuring haven currencies.

Risk Appetite Drives Market Shift

The risk-on mood is reshaping forex dynamics. The Australian dollar hit $0.64, and the New Zealand dollar reached $0.597, per Forex.com, reflecting demand for commodity and trade-sensitive currencies. Gold, a safe-haven asset, held at $3,471.70 but saw $5 billion in ETF outflows in Q1 2025, per ETF Trends, as investors pivoted to riskier assets. The euro at $1.15 and South Korean won at 1,430 also gained, per Forex.com, while the Nikkei 225 rose 0.3% and the Shanghai Composite gained 0.5%, per Bloomberg.

The $180 trillion forex market is reacting to a 90-day U.S. tariff pause for most countries and China’s 125% retaliatory tariffs, which still cloud the $105 trillion global economy, where trade drives 30% of GDP, per World Bank data. “Risk appetite is back, but it’s fragile,” says Wei Tan, a currency strategist at Singapore’s Global Markets Pulse. The USD/JPY’s Relative Strength Index at 62 and USD/CHF’s at 60 suggest potential overbought risks, per TradingView.

U.S. Policy and Global Context

Trump’s softer trade stance and Fed clarity counter earlier volatility. His prior X posts, labeling Powell a “major loser,” sank the dollar index 0.4% in a single day last week, per X chatter. A U.S. recession, with 50% odds per a Reuters poll, and Q1 GDP growth forecasts at 2%, per IMF, keep markets cautious. Bessent’s warning of a “slog” in trade talks tempers optimism, but a pause in U.S. equity sell-offs—S&P 500 down 2% Monday—supports risk assets, per Investing.com.

The yen faces additional pressure from Japan’s structural outflows, with $90 billion in annual overseas investments, per the Ministry of Finance, and a Bank of Japan rate of 0.25%, per BoJ data. The Swiss franc, backed by the Swiss National Bank’s -0.25% rate, per SNB, remains a haven but weakened as risk sentiment grew.

Why It Matters

The weakening of safe-haven currencies impacts global markets. A softer yen boosts Japan’s $4.9 trillion economy’s exporters, like Toyota, but raises import costs, with inflation at 2.5%, per Japan’s Statistics Bureau. Switzerland’s $800 billion economy sees similar dynamics, with exports like watches, 20% of GDP, gaining, per World Bank data. The $180 trillion forex market sees $10 billion in yen and franc ETF outflows, while $15 billion flows into Aussie dollar ETFs, per ETF Trends.

Businesses are hedging USD/JPY at 142 and USD/CHF at 0.82, and regional indices like Hong Kong’s Hang Seng, up 0.4%, reflect risk-on optimism, per Bloomberg. A U.S.-China trade deal could further shift flows from havens to growth currencies.

Risks to Watch

USD/JPY faces resistance at 145 and support at 140, while USD/CHF eyes resistance at 0.83 and support at 0.81, per X traders. A trade talk breakdown or renewed U.S. tariffs could revive haven demand, with Trump’s posts moving markets 0.3% last week, per X. The dollar index’s RSI at 44 suggests limited upside, per TradingView, but U.S. retail sales, up 0.2% in March, could lift it. “Trade hopes are shaky,” says Lim. “Havens could bounce back.”

Tips for Traders

Monitor USD/JPY at 140 support and 145 resistance, and USD/CHF at 0.81 support. Use stop-losses, track X for Trump’s trade comments, and consider Aussie or Kiwi dollar hedges. “Stay nimble,” advises Lim. “Risk-on’s hot, but havens aren’t dead.” Secure platforms to avoid data leaks.

What’s Next?

Safe-haven currencies like the yen and franc are fading as U.S.-China trade hopes and Fed stability drive risk appetite. With trade talks and global growth in focus, the shift from havens is notable. “Risk is in, but don’t count havens out,” says Tan. As the forex market tracks Washington, this trend is a key story.

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