SINGAPORE: The dollar took a breather on Thursday, following a sharp bounce after President Donald Trump backed away from threats to fire Federal Reserve chair Jerome Powell and his administration opened the door to a softer stance on China tariffs.
After dipping below 140 yen on Tuesday, the dollar has rebounded off major chart support and was last at 143.25 yen on Thursday.
It caught an extra boost when Treasury Secretary Scott Bessent said the U.S. did not have a specific currency target in mind, ahead of talks with his Japanese counterpart. Bessent has also said the current de-facto embargo on U.S.-China trade was unsustainable, while cautioning that the U.S. would not move first in lowering its levies of more than 100% on Chinese goods.
The dollar has recovered from a three-and-a-half-year low of $1.1572 per euro, but encountered a little selling in the Asia morning to steady around $1.1338.
It is clear, by now, that no other currency is as sensitive to trade headlines as the dollar, said ING currency strategist Francesco Pesole in a note to clients.
“We still think the balance of risks remains skewed to the downside for USD in the near term, but we don’t expect a repetition of the one-way traffic in dollar selling we have witnessed of late,” he said.
“That said, EUR/USD remains almost entirely a function of USD moves. And another leg higher above $1.15 remains possible should fears about the Fed’s independence take centre stage again.”
The Australian and New Zealand dollars were similarly off recent peaks - although not all that much.
Dollar weakens on concerns about Fed’s independence under Trump
The Aussie , after briefly breaching $0.64 this week, was at $0.6361 and Commonwealth Bank strategist Joe Capurso said it could test resistance around its 50-day moving average at $0.6286 as worries about global growth persist.
The New Zealand dollar held on at $0.5949.
Sterling and the Swiss franc each steadied after a sharp retreat, leaving sterling at $1.3263 and the Swissy at 0.8290 per dollar.
China’s yuan was steady around 7.29 per dollar in early trade.
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