Dollar Pares Tariff-Fueled Gains, Yen Underperforms
A dollar gauge was trading higher after US President Donald Trump said he would announce a tariff of 25% on all steel and aluminum imports. The greenback later scaled back its ascent as markets become weary of all the tariff announcements. The yen was the worst performer in the Group of 10.
The Bloomberg Dollar Spot Index rose as much as 0.3% on Monday to the highest level since Feb. 4 before losing traction as risk aversion eased.
“One can’t assume that once imposed, tariffs will have a long shelf life to them,” JPMorgan strategists Meera Chandan and Arindam Sandilya wrote in a note. “We are open minded to the possibility that tariffs could no longer provide the explosive 1Q USD strength given the back and forth on delivery”.
They remain dollar bullish in near term.
“Markets are trying to balance out the tariff implications for growth and for inflation,” said Aroop Chatterjee, a strategist at Wells Fargo in New York. “To the extent that growth implications are more significant than inflation, USD gains are likely to be concentrated against emerging market currencies and those of more open economies”.
“It’s heavily dependent on how much you assume the tariff agenda is implemented and how soon,” he said.
US CPI data — alongside commentary from Federal ReserveChairman Jerome Powell later this week — are in focus for further clues on the US central bank’s policy path.
USD/JPY rose 0.4% to 152.01.
“It had overshot relative to US 10yr yields and relative real rate differentials last week,” said Brad Bechtel, global head of foreign exchange at Jefferies, said. “It’s just reverting back a bit”.
Monex’s Helen Given said it is profit-taking in the yen after a positive run last week, when the currency gained 2.5% against the greenback; she said that safe-haven appeal didn’t affect the yen as much Monday “given that discussion of tariffs don’t equate to actual tariffs”.
USD/CAD was up 0.2% to 1.4314 after rising by 0.6%; Canada should try to accelerate the renegotiation of the North American trade agreement, Quebec’s Premier Francois Legault said.
“Canada is the most heavily exposed to Trump’s steel/aluminum tariffs, but economic exposure is still small,” Erik Nelson, a macro strategist at Wells Fargo, said. “The positive direction of travel for Canada’s fundamentals provides a constructive backdrop should the tariff gloom hanging over Canada become less acute relative to its peers”.
EUR/USD fell 0.2% to 1.0305, versus day low of 1.0280
European Central Bank President Christine Lagarde said the retreat in inflation is progressing, though global trade friction continues to pose risks.
GBP/USD fell 0.3% to 1.2365.
Source : Bloomberg
