US dollar weakens against safe-haven Swiss franc as tariff worries ripple through markets

By Chibuike Oguh and Yadarisa Shabong

NEW YORK (Reuters) -The U.S. dollar weakened against the safe-haven Swiss franc in mixed trading on Monday as concerns about a global recession heightened following U.S. President Donald Trump's sweeping tariffs on trading partners.

Global stock markets were hit again on Monday, although the benchmark S&P 500 was well off its lows in volatile trade, and investors wagered the mounting risk of a deep economic downturn could lead to a cut in U.S. interest rates as early as May that would erode the dollar's yield advantage.

The dollar hit its lowest in six months against the Swiss franc and was last down 0.44% at 0.85720 franc in choppy trading..

The dollar reversed early losses against other safe-haven currencies, standing 0.53% firmer against the yen in afternoon trade at 147.660, after tumbling more than 1.4% earlier.

"Because tariffs are thought to be hurting world growth, those currencies that seem to be more like risk-on currencies - the dollar bloc and the Scandies - they are underperforming," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

"On the other hand, the currencies that are typically safe-haven currencies - like the Swiss franc and yen - are performing better."

The European Commission proposed counter-tariffs of 25% on a range of U.S. goods on Monday in response to Trump's tariffs on steel and aluminium, a document seen by Reuters showed.

The euro, which gained as much as 0.7% to $1.1050 earlier in the session, was down 0.35% at $1.092800.

Sterling hit a one-month low at $1.27125 and was last down 1.3% against the greenback.

The dollar index turned 0.6% higher after weakening in early trade.

While the dollar is typically known as a safe-haven asset, that status seems to be eroding as uncertainty over tariffs and concern over their impact on U.S. growth intensify.

"Although we're getting erratic weakness in foreign currencies like the euro, sterling and even Canadian dollar, the underlying trend here is the potential for loss of faith in the U.S. dollar as a reserve currency," said Thierry Albert Wizman, global FX and rates strategist at Macquarie in New York.

"If one has to consider the view one year out as opposed to one week out, it still seems like it's tilted towards a weak U.S. dollar."

The risk-sensitive Australian and New Zealand dollars, as well as the Swedish and Norwegian crowns, all dropped against the dollar.

The Aussie currency, often used as a proxy for risk appetite, tumbled to a five-year low earlier in the session, but was last down 1.025% to $0.59835.7

The New Zealand dollar eased 1.08% to $0.55355, having slid more than 1% earlier in the session.

Trump's tariff announcements wiped out nearly $6 trillion in value from U.S. stocks last week.

TRADERS HOPE FOR RAPID U.S. RATE CUTS

More than 50 nations have approached the White House to begin trade talks. China, which has struck back with countermeasures including extra levies of 34% on all U.S. goods, said on Saturday, "The market has spoken."

Traders have ramped up bets of more Federal Reserve rate cuts this year on the view policymakers would have to ease more aggressively to shore up growth in the world's largest economy.

Markets swung to imply an approximately 65% chance o77f a Fed cut in May, and futures now point to about 100 basis points worth of rate cuts by December this year.

Fed Chair Jerome Powell cautioned on Friday it was still too soon to know what the right response from the central bank ought to be.

(Reporting by Rae Wee in Singapore and Yadarisa Shabong in Bengaluru; Editing by Himani Sarkar, Edwina Gibbs, Susan Fenton, Mark Heinrich, Rod Nickel and Cynthia Osterman)