Dollar wins reprieve from selling; investors yearn for tariff clarity
The dollar held steady on Tuesday, trading near a three-year low against the euro and a six-month trough against the yen, as investors trying to make sense of the constant changes to President Donald Trump'stariffs remained wary of U.S. assets.
Much of the volatility that hit the dollar last week and sent Treasury yields soaring appeared to have abated somewhat on Tuesday, although investor sentiment was still fragile.
The euro , which has been one of the biggest beneficiaries of this month's dumping of U.S. assets, was a touch weaker on the day at $1.1336, narrowly below last week's three-year high at $1.1474.
The dollar was slightly weaker at 142.99 yen, staying close to the six-month low of 142.05 it touched on Friday.
After slumping to a 10-year low against the Swiss franc last week, the dollar was 0.2% higher on Tuesday. Still, it is down nearly 8% against the Swiss franc this month, set for its biggest monthly drop since December 2008.
Market focus has been on the ever-shifting tariff headlines with the U.S. removing smartphones and other electronics from its duties on China over the weekend providing some relief, although comments from Trump suggested the reprieve is likely to be short-term.
Trump's imposition and then abrupt postponement of most tariffs on goods imported to the U.S. has sown confusion, adding to the uncertainty for investors and policymakers around the world.
There was a greater sense of calm across the market on Tuesday. But given the uncertainty Trump and his vacillation over tariffs have stirred up, analysts expected the reprieve for the dollar to be short-lived.
The yield on the benchmark U.S. 10-year Treasury note edged up 2 basis points to 4.38% after dropping nearly 13 basis points in the previous session.
Yields rose about 50 bps last week - their biggest weekly increase in over 20 years - as analysts and investors questioned U.S. bonds' status as the world's safest assets.
Fed Governor Christopher Waller said on Monday the Trump administration's tariff policies are a major shock to the U.S. economy that could lead the Federal Reserve to cut interest rates to head off a recession even if inflation remains high.
Traders are pricing in 86 bps of cuts from the Fed for the rest of the year, LSEG data showed.
The dollar index , which measures the U.S. currency against six others, was at 99.641, not far from last week's three-year low. The index is down over 4% this month, set for its biggest monthly drop since November 2022.
The more risk-linked currencies enjoyed a bout of strength. Sterling was up 0.1% at $1.347, while the Australian dollar rose 0.7% to $0.6371 and the New Zealand dollar gained 0.71% to reach $0.592, near its highest in four and half months.
Source : Reuters
