Dollar Weakens, Euro & Pound Strengthen Amid Tariff Uncertainty
The US dollar weakened on Monday (February 23rd) as markets were again gripped by uncertainty over President Donald Trump's tariff policy, while awaiting developments in US-Iran nuclear talks this week. The Dollar Index fell about 0.3% to 97.487 at 09:15 GMT, after posting a weekly gain of about 1% last week—the strongest in more than four months.
Pressure arose after the US Supreme Court ruled that Trump's massive tariffs exceeded his authority. In response, Trump imposed a 15% "umbrella" tariff on imports, triggering a re-evaluation of many trade agreements. Some analysts believe this new scheme could change the tariff advantage: some countries could receive lower tariffs, but countries that previously had a "10% deal" could lose their advantage. Additional uncertainty stems from the duration of the replacement tariffs, which are said to be in effect for 150 days, and it is unclear whether importers are entitled to a refund of duties already paid—a situation that could potentially trigger lengthy litigation.
In addition to trade issues, the market is also monitoring the increase in US military strength in the Middle East, amid pressure on Iran over its nuclear program. The fact that the US did not launch an attack this weekend has helped reduce some of the risk premium, but the direction of tariff policy and its implications for the US economy are considered to remain a major burden on the dollar.
In Europe, the EUR/USD pair rose around 0.3% to 1.1811, supported by a weaker dollar and increased confidence in the regional economy. Data showed eurozone business activity strengthening and manufacturing returning to expansion for the first time since October, plus German sentiment improved after the Ifo business climate index rose to 88.6 from 87.6.
The pound sterling also strengthened, with GBP/USD rising 0.2% to 1.3514 ahead of several risk events this week, including testimony by Bank of England Governor Andrew Bailey and the UK by-election.
Meanwhile, in Asia, the USD/JPY pair fell 0.3% to 154.63 as the yen gained support as a safe-haven currency, despite thin trading due to a holiday in Japan. USD/CNY remained relatively stable at 6.9087, with Chinese markets still closed for New Year celebrations.
Source: Newsmaker.id
