The sharp decline in the U.S. dollar and Treasuries, triggered by Donald Trump’s trade initiatives, has forced global investors to reconsider their longstanding trust in the stability of the American currency. Amid growing trade-related risks, holders of tens of trillions of dollars in dollar assets have begun seeking protection from currency fluctuations.

The dollar fell to its lowest level in two years against a basket of six major currencies, while Treasury yields surged — a sign of panic as investors pull funds from dollar-based assets. Analysts warn that even a small increase in hedging ratios could lead to massive dollar sell-offs.

Japanese pension and insurance funds, holding up to $2 trillion in U.S. assets, are among the hardest hit. A 6% surge in the yen this month makes dollar-denominated returns less attractive, prompting investors to buy yen and hedge more aggressively.

European regulators, including the ECB, have begun calling banks to inquire about their exposure to U.S. government bonds — a sign of growing concern over assets once considered unquestionably safe.

Analysts estimate that a 10–15 percentage point increase in hedging could trigger the sale of trillions of dollars, potentially sparking further volatility across global financial markets.