European Central Bank analysis released Tuesday indicates that the euro has begun to assume safe-haven characteristics during distinct episodes of market volatility in 2025 and the start of 2026. The currency's behavior in these episodes contrasted with its longer-run pattern and saw it move alongside long-established safe havens such as the Swiss franc and Japanese yen.
The ECB compared the euro's response to risk-off events with historical norms. Between January 2006 and April 2026, the euro's effective exchange rate typically registered modest appreciations of about 0.1% during risk-off episodes. By comparison, the Swiss franc generally appreciated by nearly 0.7% under similar conditions.
The report highlights a sequence of U.S.-related events that coincided with more pronounced safe-haven flows into the euro. Notably, on April 2, 2025, when the U.S. administration introduced tariffs, global financial markets experienced heightened volatility. During the immediate aftermath, the euro strengthened while the U.S. dollar eased and yields on U.S. Treasury bonds moved higher.
Additional U.S.-originated risk episodes recorded by the ECB showed similar patterns. The euro appreciated when the U.S. Department of Justice issued subpoenas to the Federal Reserve and again when the U.S. administration threatened to raise tariffs on European imports. These instances were followed by relative strength in the euro during periods of risk aversion.
Geopolitical developments also influenced exchange-rate dynamics during the period under review. Following the outbreak of war in the Middle East, the euro initially weakened but later recovered some of its losses as tensions diminished. The report notes that the U.S. dollar's strength through parts of this episode reflected a mix of global risk factors and differing economic outlooks between the United States and the euro area, which together affected currency moves.
Official flows and market structure shifts accompanied the currency moves. Data cited in the report show the value of U.S. Treasuries held in custody at the New York Federal Reserve by official institutions fell by $82 billion, to $2.7 trillion in March 2026 - the lowest recorded level since 2012. At the same time, convenience yields for German bunds increased during 2025, and purchases of euro-area debt and equities by foreign investors reached multi-year highs by the end of 2025.
Taken together, the ECB's findings point to a changed environment in which the euro has, at times, attracted safe-haven flows previously concentrated in other currencies. The report presents these developments as observable outcomes tied to the listed episodes and data, without ascribing a single cause beyond the documented events and flows.
Key points
- The euro began to act like a safe-haven currency during several risk-off episodes in 2025 and early 2026, moving with the Swiss franc and Japanese yen.
- Specific U.S.-originated events - including April 2, 2025 tariffs, DOJ subpoenas to the Fed, and tariff threats on European imports - coincided with euro appreciation and U.S. dollar weakness.
- Official holdings of U.S. Treasuries at the New York Fed fell by $82 billion to $2.7 trillion in March 2026, while foreign purchases of euro-area debt and equities reached multi-year highs and German bund convenience yields rose in 2025.
Risks and uncertainties
- Geopolitical tension - Exchange-rate movements may reverse or fluctuate if geopolitical conditions change, as illustrated by the euro's initial depreciation and partial recovery after the Middle East conflict.
- U.S. policy actions - Further U.S.-originated policy moves or legal developments could trigger renewed market volatility and influence currency and bond markets.