Dollar Weakens as China Retaliates, Yen Strengthens
The dollar weakened versus most major peers Wednesday as China retaliated against new tariffs. The Australian dollar and Japanese yen outperformed peers in the Group of 10.
The Bloomberg Dollar Spot Index fell 0.5%, second day of declines
A pullback from US Treasuries sent longer-term yields surging by the most since pandemic struck in 2020
The Chinese government will impose an 84% tariff on all imports from the US starting April 10, the Finance Ministry said in a statement Wednesday
The People’s Bank of China weakened the yuan’s daily reference rate for a fifth straight session but moderated the pace of its adjustment. It’s managing to guide the yuan weaker at a careful pace
AUD/USD rose 1% to 0.6017
“US-China trade tensions warrants a more cautious medium-term outlook for AUD despite the Australian economy’s limited direct exposure to US protectionism,” UBS Investment Bank’s analysts wrote
The team changed 2Q AUD/USD target to 0.60 from 0.62 and year-end target to 0.63 from 0.65
“The reasons we still expect AUD to strengthen over the medium-term are largely external as we see Fed cuts resuming in 2H 2025 which would have USD weakening more broadly,” they said
USD/JPY fell 0.8% to 145.09
Bank of Japan Governor Kazuo Ueda highlighted growing uncertainties stemming from tariff measures while also reiterating the BOJ’s existing policy stance that it will raise the benchmark interest rate if its economic outlook is realized
“We maintain our view that the yen will outperform among major currencies,” said Yusuke Miyairi, a currency strategist at Nomura International Plc, explaining that the key is to watch for the dollar part of the pair
“Traditionally, the dollar tends to strengthen during US economic downturns,” he said, but since Trump’s administration is trying to weaken the dollar and global skepticism about investing in the US assets is growing, “it’s unclear whether this relationship will persist”
EUR/USD rose 0.6% to 1.1027
The ECB should lower interest rates “soon” as US President Donald Trump’s tariffs and the fallout on global markets favor such a move, according to Governing Council member Francois Villeroy de Galhau; a cut next week is fully priced in, swaps pricing indicates
USD/CHF down 0.7% to 0.8421
One-week hedging costs in USD/CHF surged to their highest level in five years
Source : Bloomberg
