U.S. Dollar’s Weakness Creates an Opportunity for the Euro. Can It Last?

President Trump’s shake-up of the global trade system has sent tremors through the long-held view that the United States is the source of the world’s safest financial assets. That’s created an opportunity for Europe.

The market tumult in which investors simultaneously sold off the U.S. dollar, American stocks and U.S. Treasury bonds eased last week as Mr. Trump backed off his threats to fire the Federal Reserve chair, Jerome H. Powell, and Treasury Secretary Scott Bessent tried to reassure foreign officials that trade deals would be struck.

But many European officials attending the spring meetings of the International Monetary Fund and World Bank in Washington last week were skeptical that the uncertainty over Mr. Trump’s trade policy would dissipate any time soon. They said the unpredictable nature of the Trump administration’s approach to setting policy would not easily be forgotten. Instead, they saw the potential to attract investors to European assets, from the euro to the bond market.

“We see that our stability, predictability and respect for the rule of law is already proving a strength,” Valdis Dombrovskis, the European commissioner responsible for the trade bloc’s economy, said on Wednesday in a discussion on the sidelines of the I.M.F. meetings. “We already have stronger investor interest in euro-denominated assets.”

The most comprehensive indication that funds are flowing to Europe: Since the beginning of April, the euro has gained 5.4 percent against the dollar, rising above $1.13, the highest level since late 2021.

The question among policymakers and investors is whether the recent jump in the euro and other euro-denominated assets is simply a short-term rebalancing of portfolios that heavily favored the dollar or the beginning of a long-term trend in which the euro firmly encroaches on the dollar’s role as the world’s dominant currency.