The dollar nursed savage losses against the yen and euro on Friday as a plunge in U.S. yields to record lows wiped out the currency's single greatest attraction for investors - higher interest rates.
Mounting fears over the fallout from the coronavirus has driven a truly tectonic shift in expectations for U.S. rates as markets wager the Federal Reserve will have to cut rates by 50 basis points for a second time this month.
The resulting collapse in Treasury yields has been the death of one of the most popular carry trades globally - borrowing at negative rates in the euro and yen to buy U.S. assets.
"Select USD pairs like EUR/USD are turning because of a dramatic and decisive shift in U.S. rate expectations and related spreads," said Alan Ruskin, global head of G10 FX strategy at Deutsche Bank (DE:DBKGn).
"The USD has lost the single most important source of its over-valuation, a strong carry advantage," he added, warning this could end a dollar uptrend that has lasted since mid-2018.
In particular, were the euro to close above the December peak of $1.1239, it would breach a down channel from August 2018 and signal a clear break of the bull trend.
The single currency was almost there, being up at $1.1226 (EUR=) on Friday having surged 0.9% overnight and a world away from the February trough of $1.0775. It was already up 1.9% for the week which would be the largest such gain since June 2017.
There were lots of other miserable milestones, with the dollar sinking to a six-month low on the yen at 105.96 having shed 1.2% overnight. The next bear targets were 105.72 and 104.44, lows from August and September last year.
It also sank to a two-year trough against the Swiss franc at 0.9443 francs , and was down 2% for the week so far.
The yen, euro and Swiss franc are backed by countries that run strong external surpluses, while Japan has the added advantage of being the world's largest creditor nation.
Those safe-haven attributes had grown in importance as U.S. 10-year yields (US10YT=RR) tumbled to just 0.91%, a drop of 66 basis points in just 11 sessions.
Fed fund futures were also pricing in more than 80 basis points of further easing by year end.
Yet the dollar was not down and out everywhere, as it still held safe haven status compared to emerging market currencies and those exposed to commodities.
That left it holding gains on the Canadian , Australian and New Zealand dollars , along with a raft of currencies across Asia.
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