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Trump's harsher-than-expected tariffs, announced just over 24 hours earlier, has sent shockwaves through markets
Published : 04 Apr 2025, 10:03 AM
The US dollar struggled to regain its footing with the safe-haven yen hovering near a six-month peak on Friday, as traders took stock of the fallout from President Donald Trump's aggressive and far-reaching new tariff measures.
The dollar was steady after bouncing off six-month troughs to the euro and sterling overnight, with the focus now turning to a crucial monthly US payrolls report later in the day for clues on the health of the economy and the outlook for monetary easing.
Trump's harsher-than-expected tariffs, announced just over 24 hours earlier, had sent shockwaves through markets. Stocks bore the brunt of a searing selloff, sending investors into the safety of assets such as bonds and gold on fears a full-blown trade war could trigger a global recession and fuel inflation.
The dollar had already been on the back foot this year after initial euphoria over Trump's policy agenda morphed into worries that his focus on trade barriers could lead to stagflation or even a US recession.
The dollar index =USD, a measure of the currency against a basket of six major peers, plunged 1.9% on Thursday, its worst day since November 2022.
The greenback edged down 0.15% to 145.89 yen JPY=EBS as of 0057 GMT, after alternating between smalls gains and losses in early trading on Friday. It slumped 2.2% in the prior session, and dipped as low as 145.19 yen for the first time since October 2.
The euro EUR=EBS inched up 0.08% to $1.1060, after jumping as high as $1.1147 on Thursday, a level not seen since September 30.
Sterling GBP=D3 was steady at $1.3103, following its push as high as $1.3207 a day earlier, the first time it had hit that level since October 3.
"'Uncertainty' is the word of 2025, and while we now have the tariff rates and the timeline, and Trump and (Treasury Secretary Scott) Bessent have shown some willingness to negotiate, the questions being asked of the market have only increased," Chris Weston, head of research at Pepperstone, wrote in a note to clients.
"The loss of confidence to hold US dollars is clear."
Echoing that sentiment, Deutsche Bank warned on Thursday of the risk of a crisis of confidence in the US dollar, saying major shifts in capital flow allocations could take over from currency fundamentals and spark disorderly currency moves.
Trump said he would impose a 10% baseline tariff on all imports to the United States and higher duties on some of the country's biggest trading partners, including a 20% rate on the European Union and a 24% rate on Japan. China now faces combined duties of some 54%.
Both China and the EU vowed countermeasures, raising the risk of a broader trade war.
Chinese markets are observing a national holiday on Friday, but in offshore trading CNH=D3, the dollar eased 0.13% to 7.2686 yuan. On Thursday it had leapt as much as 0.7% at one point to a two-month high.
Economists estimate the US economy added 135,000 jobs in March, down from 151,000 the month before, ahead of the release of the report later Friday.
Hours later, Federal Reserve Chair Jerome Powell is scheduled to deliver a speech on the economic outlook.
Traders have ramped up bets for Fed easing this year in the aftermath of Trump's latest tariff announcement, penciling in quarter-point cuts for June, July, October and December.
The two-year US Treasury yield US2YT=RR, which is sensitive to policy expectations, sank some 6 basis points (bps) to 3.6611% on Friday, extending an 18 bps slide from the previous day.
Elsewhere in currency markets, the risk-sensitive Australian and New Zealand dollars remained weak, with the Aussie AUD=D3 down 0.12% at $0.6321 and the kiwi NZD-D3 off 0.09% at $0.5789.
Cryptocurrency bitcoin BTC= rose 0.9% to just above $83,000, continuing to trade in a relatively tight range over the past few weeks, despite the chaos in most other markets.
