| For most of my career, markets have believed in the dollar smile. This is the idea that the greenback outperforms other currencies at the extremes—both when the American economy is racing ahead, but also when turmoil leads investors to seek a haven. This week’s cover story is about how the smile could become a scream.
Since its peak in mid-January the dollar has fallen by over 9% against a basket of major currencies. And the yield on ten-year Treasuries has crept up since April 1st by 0.2 percentage points. That combination is more typical of emerging markets than the bedrock of the global financial system.
The really shocking thing is that this scare has been triggered by the White House. The ineptitude, self-harm and capriciousness of Donald Trump’s tariffs are eroding investors’ belief that foreigners and their money will continue to be welcome and secure in America. It has become possible to imagine how rising borrowing costs, a weakening economy and a loss of credibility could make the country’s fiscal deficit unsustainable.
Covid-19 required Congress to spend its way out of trouble. A crisis today would be much harder to manage, because Congress would have to axe entitlements or raise taxes—and have just hours or days to win Mr Trump’s backing. It’s enough to wipe the smile from your face.
This newsletter lands in your inbox earlier than usual, to ensure our weekly edition is available in time for the Easter break. And besides, who knows where the dollar will be by tomorrow?
Happy reading—and may your Easter be calmer than the currency markets. | 
