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KDI 경제교육·정보센터

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최신자료
Dollar Movements and Dollar Dominance in the Aftermath of Liberation Day
AEI
2025.06.20
This paper provides econometric evidence in support of the view that since President Trump’s chaotic tariff announcements on Liberation Day, April 2, the dollar has switched from being a safe-haven currency that appreciates in times to market volatility to a “risk-on” currency that moves inversely with volatility. We estimate an equation for daily changes in the DXY dollar index, using as explanatory variables daily changes in US-foreign interest rate differentials and the VIX, a measure of market volatility. We find a significant break in the relationship between the dollar and its primary determinants after Liberation Day, with the dollar falling below its predicted level. More importantly, the sensitivity of the dollar to the VIX has shifted from positive to negative, suggesting that global investors have ceased to treat the dollar as a safe haven in times of stress. Whether this shift in the dollar’s behaviour is temporary or permanent, and whether it will start to degrade the dollar’s broader dominance in the global financial system, remains to be seen.