Traditional safe-haven assets—U.S. Treasuries, the Japanese yen, the Swiss franc, and gold—failed to provide investors with shelter this week. In contrast, the U.S. dollar, whose status as a safe haven has increasingly been questioned, emerged as one of the few major assets to advance.
These movements suggest that market dynamics can shift rapidly. Shifting expectations around central bank policies and economic growth, combined with swings in trader sentiment, have suddenly eroded the appeal of assets once considered reliable shelters.
"The concept of a safe haven is not what it used to be," said Christoph Rieger, Head of Rates and Credit Research at Commerzbank. "During a crisis, when all policy options point toward increasing supply and opposing rate cuts, so-called safe assets fail to act as hedges. Some market moves are rational, others are not."
Below is a detailed analysis of why conventional safe havens underperformed this week:
U.S. Treasuries U.S. government debt is typically regarded as the world's safest asset during turbulent times. However, the threat of inflation, driven by surging oil and gas prices, has overshadowed this safe-haven demand.
The yield on the 10-year Treasury note has climbed 20 basis points this week, on track for its largest increase since the tariff tensions of April last year. This marks a dramatic reversal from last month, which saw the yield post its biggest decline in a year.
The inflation threat also means traders now expect fewer interest rate cuts. Swap contracts are currently pricing in one to two 25-basis-point cuts, compared with expectations for as many as three cuts just a week ago.
Gold Gold has also underperformed.
Weighed down by a stronger U.S. dollar and rising expectations for interest rate hikes, the price of gold fell 3.5% this week. The non-yielding metal typically becomes more attractive in a low-interest-rate environment.
A similar pattern occurred after the outbreak of the Russia-Ukraine conflict. At that time, soaring energy prices led to higher rate expectations and a stronger dollar—and gold weakened in the subsequent months. That period has become a reference point for some traders.
Additionally, gold's approximately 54% gain since mid-August of last year has made it a target for speculation, resulting in unusually sharp volatility.
Japanese Yen Again, the issue centers on energy. Japan depends on the Middle East for over 90% of its crude oil imports, much of which passes through the Strait of Hormuz—a channel effectively closed due to the conflict.
Furthermore, Japanese unions are demanding wage increases, and inflation is beginning to pick up.
This creates a stagflationary setup—rather than demand-driven price increases that might justify aggressive tightening by the Bank of Japan—which helps explain why the yen has depreciated about 1% against the U.S. dollar this week.
Japan's Finance Minister, Tsuyoshi Kamikawa, reiterated on Wednesday that the government is prepared to act against excessive currency fluctuations, including through market intervention.
Swiss Franc Switzerland's low debt, sound policies, and political neutrality have made the franc the preferred safe-haven currency over the past year. However, in the current currency crisis, its particular vulnerability lies in the apparent eagerness of policymakers to intervene to curb excessive appreciation.
Swiss National Bank Vice Chairman Antoine Martin stated that the central bank stands ready to intervene to prevent franc strength amid Middle East turmoil, causing the franc to drop 1.5% against the dollar this week. His concern is that safe-haven inflows would drive up the franc, thereby suppressing inflation, which is already hovering near zero.
Meanwhile, Barclays FX strategists have recommended that investors buy the franc against the yen. They argue that although both currencies face energy-related risks, the franc holds a relative advantage. Data from the DTCC also shows resilience in options flow for the franc against the dollar.
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