Battered U.S. Dollar Steadies But Investors Brace For More Tariff Volatility
The U.S. dollar found its footing on Monday but remained near a three-year low after a painful week that shook investor confidence in the world’s reserve currency as U.S. President Donald Trump’s tariff plans rattled global markets.
Investors were bracing for another volatile week as Trump’s abrupt imposition and delay of tariffs on goods imported into the U.S. continued to cause confusion.
Currency markets were largely steady after the White House on Friday granted exemptions from high tariffs for smartphones, computers and some other electronics mostly imported from China, though Trump said over the weekend the move would be short-lived.
“At this point … it’s been handled in a haphazard, arbitrary and loaded manner, and it’s created a lot of uncertainty,” said IG market analyst Tony Sycamore.
“Those storm clouds, they’re still circling, they haven’t gone anywhere.” The dollar was last up 0.34% against the Swiss franc, after falling to a decade low on Friday and posting its worst week against the Swiss franc in more than two years.
The euro fell 0.13% to $1.1344, after surging 3.6% last week and hitting a three-year high on Friday as investors flocked to the common currency following a crisis of confidence in the dollar.
"I think we could see the euro trading at $1.20 by about ... late July, early August," IG's Sycamore said.
Growing nervousness among investors about holding U.S. assets has led some to dump those positions and move money into markets including Europe, with those flows boosting the euro.
Elsewhere, the yen fell 0.2% to 143.79 per dollar, while sterling fell 0.33% to $1.3084.
The Australian dollar rose 0.15% to $0.63035, extending its more than 4% gain from last week.
Against a basket of currencies, the U.S. dollar last stood at 99.73, not far from a three-year low hit on Friday.
"Markets are reassessing the dollar's structural appeal as the world's global reserve currency and are undergoing a rapid de-dollarization process," George Saravelos, global head of FX research at Deutsche Bank, wrote in a client note.
"This is most evident in the sustained and combined collapse in the U.S. currency and bond markets."
The massive sell-off in the U.S. Treasury market last week, driven in part by the rapid unwinding of so-called basis trades by hedge funds, was a major drag on the dollar. On Monday morning, there was little sign of a recovery in the 10-year Treasury note at 4.47% after the biggest weekly rise in borrowing costs in decades.
"We think the de-dollarization process has some way to go, but we remain open-minded about how it plays out and what the new equilibrium in the global financial architecture will look like," Saravelos said.
In other currencies, the New Zealand dollar rose 0.33% to $0.5843. The offshore yuan fell 0.17% to 7.2941 per dollar ahead of the onshore market opening on Monday afternoon.
Source: Reuters
