Dollar rises versus yen, Swiss franc, Fed and trade talks in focus

CNBC

07-05-2025

The dollar began Monday on a weak note after significant losses last week due to a potentially weakening U.S. labor market, while concerns over a global trade war led investors to safe havens, lifting the yen and the Swiss franc.
The U.S. dollar rose against the safe-haven yen and Swiss franc while steadying versus the euro as investors looked towards the impending outcome of the Federal Reserve policy meeting later in the session and tariff negotiations.
U.S. Treasury prices rose on Tuesday, as a well-received auction of the benchmark 10-year note suggested demand for Treasuries remained intact after a trade war shook investor confidence in U.S. assets.
The greenback dropped sharply on the U.S. tariff announcement early last month before jumping on April 22 as U.S. Treasury Secretary Scott Bessent suggested there would be a de-escalation in U.S.-China trade tensions.
Bessent and chief trade negotiator Jamieson Greer will meet China's economic tsar, He Lifeng, in Switzerland this weekend for talks that could be the first step toward resolving a trade war that has disrupted the global economy.
The Fed is expected to leave interest rates unchanged on Wednesday, with investors focusing on any clues about the rate outlook as U.S. tariffs cast uncertainty over the economy.
The greenback was up 0.54% versus the yen at 143.18, breaking a three-day falling streak, with Japanese markets reopening after a two-day holiday.
Analysts flagged Treasury Secretary Scott Bessent's testimony to the House on the 'State of the International Financial System' later in the day.
"He'll argue that U.S. bond markets are functioning in an orderly manner and probably repeat the mantra that Washington retains a strong dollar policy," said Chris Turner, head of forex strategy at ING.
"It will be interesting, however, if he's quizzed on whether currency deals are part of the trade negotiations currently underway with 17 other trading partners."
The greenback was up 0.3% against the Swiss franc at 0.8248. On Monday, it hit its lowest level since January 2015 at 0.8032.
The Swiss National Bank is ready to intervene in the foreign currency markets and cut rates even below zero to prevent inflation falling below its price stability target, Chairman Martin Schlegel said on Tuesday.
The greenback got a "micro bounce" on the impending trade talks, but broad pessimism about the U.S. economy and the dollar remain intact, according to IG analyst Tony Sycamore.
The dollar index -- a measure of the value of the greenback relative to a basket of foreign currencies -- slipped 0.05%, extending losses into a fourth day. The euro was down 0.05% at $1.1363.
Earlier this week, a record rally in the Taiwan dollar spread to other currencies in Asia, such as the Singapore dollar and the South Korean won.
The Taiwan dollar has surged against the U.S. currency since U.S. President Donald Trump's April 2 announcement of sweeping tariffs on trade partners.
The won reached a six-month high at Wednesday's opening, but subsequently fell 1.5%. The yuan weakened as China announced a long-awaited rate cut.
Currency markets seemed a bit calmer on Wednesday following the stunning two-day leap for Taiwan's currency.
"We agree with the view expressed in the market that the extremely volatile markets seen in Taiwan forex over the last few days are a warning shot," George Saravelos, global head of FX research at Deutsche Bank, wrote.
"Self-fulfilling moves could happen to other currencies where the institutional investor industry is left with a large overhang of un-hedged U.S. dollar asset positions. The yen immediately comes to mind."