US dollar dips as tariff worries resurface
The U.S. dollar fell across the board on Monday, giving up the previous week's gains, as markets weighed the outlook for President Donald Trump's tariff policy and its potential to hurt growth and stoke inflation.
The U.S. currency slipped after Trump said on Friday he planned to double duties on imported steel and aluminum to 50% starting on Wednesday, and as Beijing hit back against accusations it violated an agreement on critical minerals shipments.
China's Commerce Ministry said on Monday the charges were "groundless," and promised to take unspecified forceful measures to safeguard its interests. Treasury Secretary Scott Bessent said on Sunday Trump and Chinese President Xi Jinping were likely to have a call soon, and "this will be ironed out."
The dollar dropped 0.8% to 142.85 yen , nearly wiping out its gain against the Japanese currency last week.
The euro rose 0.8% to $1.14355 - its highest since late April. Later in the week, the focus will be on the European Central Bank's interest rate decision and subsequent outlook.
The dollar extended its losses after data showed U.S. manufacturing contracted for a third straight month in May and suppliers took longer to deliver inputs amid tariffs, potentially signalling shortages of some goods.
Earlier in the session, data showed European manufacturing took another step towards stabilisation in May, but Asian factory activity declined.
The dollar index, which measures its performance against six other major currencies , eased 0.6% and at 98.75 was just shy of the three-year low of 97.923 touched in late April.
The U.S. currency has been whipsawed for weeks by Trump's on-again-off-again trade war, and investors have been questioning the currency's safe-haven status as a flare-up in tensions stokes worries of a potential U.S. recession.
Last week, the dollar got some respite, rising 0.3% after trade talks with the European Union got back on track and a U.S. trade court blocked the bulk of Trump's tariffs on the grounds that he overstepped his authority.
An appeals court reinstated the duties a day later, and Trump's administration said it had other avenues to implement them if it loses in court, but many analysts said it showed there were still checks in place on the president's power.
Fiscal worries have also given rise to a broad "sell America" theme that has seen dollar assets from stocks to Treasury bonds dropping in recent months.
Those concerns come into sharp focus this week as the Senate starts considering the administration's tax cut and spending bill, estimated to add $3.8 trillion to the federal government's $36.2 trillion in debt over the next decade.
Bitcoin, the world's largest cryptocurrency by market capitalisation, was 0.7% lower on the day at $104,315.
Source : Reuters
