Dollar holds losses after Trump announces Japan trade deal, yen wobbles
The U.S. currency has been one of the biggest losers since Trump announced sweeping tariffs on trading partners on April 2, only to delay and suspend most of the duties as his administration sought bilateral trade deals.
The yen hit its strongest level since July 11 at 146.20 per dollar on the trade news but flipped to losses after a report that Japanese Prime Minister Shigeru Ishiba intends to step down next month. It last fetched 146.92.
In a post on Truth Social, Trump said that a tariff rate of 15 per cent was set on imports from Japan, down from the 25 per cent rate that was expected to take effect from August 1, and added the Asian nation will invest $550 billion in the United States.
"Dollar softness seems to be our opening proposition," said Michael McCarthy, Market Strategist at Moomoo Australia.
"Clearly, there's some dovishness infecting the market at the moment around the U.S. dollar and we're seeing that in the bond markets too."
The dollar index, which tracks the greenback against major peers, was at 97.48 after a three-day decline, hovering near its lowest level since July 10. The gauge has lost 6.6 per cent since Trump's "Liberation Day" tariff announcement on April 2.
U.S. Treasury Secretary Scott Bessent said on Monday the administration is more concerned with the quality of trade agreements than the timing.
Asked whether the deadline could be extended for countries engaged in productive talks with Washington, Bessent said Trump would make that decision.
Uncertainty over the eventual state of tariffs globally has been a huge overhang for the foreign exchange market, leaving currencies trading in a tight range for the most part, even as stocks on Wall Street have scaled fresh highs.
Japan's all-important auto industry and rice imports were sticking points in protracted trade talks with the U.S. In his post on Truth Social, Trump said Japan would open to trade for U.S. cars, trucks, rice and certain agricultural products, among other items.
Ishiba told reporters in Tokyo that the deal would set a 15 per cent tariff on imports of Japanese vehicles. Ishiba, whose ruling coalition lost its majority in upper house elections on Sunday, will announce his resignation by the end of next month, Japanese media reported on Wednesday.
The trade deal with Japan could pave the way for more deals, including with Europe. Trump said negotiators from the European Union would be in Washington on Wednesday.
The news boosted the Australian and New Zealand dollars, although sentiment remained cautious. The Aussie firmed 0.19 per cent to $0.6568, while the kiwi gained 0.25 per cent to $0.60175. Sterling was little changed at $1.3527.
The euro stood at $1.1737 , down 0.15 per cent but still near a four-year high it touched at the start of the month. The single currency has surged over 13 per cent this year as investors looked for alternatives to U.S. assets.
The European Central Bank is expected to hold rates steady on Thursday after eight consecutive rate cuts, with the prospect of steeper-than-expected U.S. tariffs looming.
Also weighing on investors' minds were worries about Federal Reserve independence, given Trump has repeatedly railed against Chair Jerome Powell and urged him to resign because of the central bank's reluctance to cut interest rates.
Bessent on Monday took a softer stance, saying there is no need for Powell to step down immediately, adding that he should see through the end of his term in May if he wants.
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