NEW YORK: The dollar weakened against the euro and yen on Tuesday as uncertainty around President Donald Trump’s planned tariffs kept traders cautious, following a rally in the US currency a day earlier on optimism that he will be flexible in applying the import levies.
“The world’s trading a little bit more risk-off today after a risk-forward day yesterday,” said Helen Given, FX trader at Monex USA, noting that Monday’s move “wasn’t really based on very much except for headlines.”
Trump said on Monday that not all of his threatened levies would be imposed on April 2 and some countries might get breaks.
The dollar has weakened on fears that tariffs will slow the US economy and also reignite inflation. Rising optimism that the tariffs won’t be as bad as feared, however, has helped the greenback stabilize in the past few weeks.
A stronger-than-expected services component in S&P Global’s flash US PMI figures on Monday also helped to offset concerns that the US economy is facing a near-term contraction.
Currency moves were relatively muted after data on Tuesday showed that US consumer confidence dropped for a fourth straight month in March, with households the most pessimistic about the future in 12 years.
The euro, meanwhile, was boosted earlier by a survey showing that German business morale rose in March as companies expect a recovery after two years of contraction in Europe’s largest economy.
The euro was last up 0.12% on the day at $1.0813. It earlier fell to $1.0774, the lowest level since March 6.
The dollar fell 0.64% to 149.73 Japanese yen. It earlier reached a three-week high of 150.94.
The US currency will likely be boosted by month-end and quarter-end rebalancing later this week and on Monday.
“The biggest flow dynamic that we see right now is a little bit of a turnaround from the decidedly USD-negative first quarter that we saw as people start to pare off those positions into month-end and quarter-end,” Given said.
Commodity Futures Trading Commission data on Friday showed speculators turned net bearish on the US currency last week for the first time since October. The Australian dollar climbed after the country’s government launched fresh tax cuts on Tuesday and announced other cost-of-living relief in a major push to win back disgruntled voters. It was last up 0.45% at $0.6313.
Sterling edged up 0.21% to $1.2946 as traders looked towards the release of the spring statement on Wednesday in which British finance minister Rachel Reeves is expected to cut government spending to meet fiscal rules.
British retailers reported the sharpest drop in sales volumes in eight months in March and they expect to see little improvement next month, an industry survey showed on Tuesday. Bitcoin rose 0.22% to $88,086.21. It reached $88,772 on Monday, its highest price since March 7.
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