Dollar strong as Trump imposes new tariff rates; yen slide spurs government warning
The dollar also gained on non-tariff catalysts, with the yen touching a four-month low, extending a steep decline from Thursday after the Bank of Japan signalled it was in no hurry to resume interest rate hikes.
That prompted Japanese Finance Minister Katsunobu Kato to say on Friday that officials are "alarmed" by currency moves. The yen last changed hands at 150.46 per dollar after earlier dipping to 150.915 per dollar, its weakest since March 28.
The U.S. dollar index - which measures the currency against a basket of six major peers including the euro, yen, Swiss franc and Canada's dollar - is on course to rise 2.4% this week, its best weekly performance since a 3.1% rally in September of 2022.
On Friday, it ticked up 0.1% to 100.14, its highest since May 29.
Some countries fared much worse than others in tariff rates, hurting their currencies.
Canada received a 35% levy instead of an earlier threatened 25%, briefly pushing the loonie down 0.12% to C$1.3872, its lowest since May 22 versus its U.S. peer.
The Swiss franc eased as much as 0.26% to 0.8120 per dollar after Trump set a 39% duty on Swiss imports, up from the 31% he previously mooted.
Asian emerging markets got swept up in the selloff as the tariff fallout rippled through the region. The Philippine peso slumped to its weakest level in six months, while Taiwan's dollar hit its lowest since early June. South Korea's won sank to levels last seen in mid-May.
The euro remained pinned near an almost two-month low around $1.1428, as it continues to be weighed down by what markets see as a lopsided trade agreement with Washington. That wasn't far from Wednesday's low of $1.1401, a level not seen since June 10.
"In the short-term, you can make the case for more dollar strength," said Mike Houlahan, director at Electus Financial in Auckland. "The lion's share of the tariff news has washed through."
"The big move of the week has really been the euro getting rerated downwards," he said. "The net result would be the EU-U.S. trade deal is a further headwind for the euro."
The EU's framework trade agreement with the U.S., struck on Sunday, was quickly criticized by French leaders and the German head of the European Parliament's trade committee as being unfair for Europe.
The U.S. dollar stayed strong even though Trump continued his attacks on Federal Reserve Chair Jerome Powell overnight, calling him a "terrible" Fed Chair and calling his own decision to appoint Powell to the position a "mistake".
Trump's repeated threats to fire Powell and calls for the Fed to drastically cut rates have put the central bank's independence in question, hurting the dollar in recent months.
The Fed shrugged off that pressure on Wednesday by holding policy steady, citing "somewhat elevated" inflation and a "solid" labour market.
That view of employment will be tested later in the day with the release of the closely watched monthly payrolls data.
Economists forecast that employment growth dropped to 110,000 new jobs in July from 147,000 new jobs the previous month, a notable slowdown but one that is not expected to be particularly worrying.
"Data-wise, the U.S. looks resilient," said Shoki Omori, chief desk strategist at Mizuho Securities.
"If the U.S. economy is already operating above potential, that bump can translate into a slightly higher neutral rate of interest, which is supportive for front-end bond yields and therefore the U.S. dollar," he said.
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