Dollar wavers on uncertainty over trade deals; S.Korean won in focus

Zawya

15-05-2025

TOKYO: The dollar wobbled on Thursday in a turbulent week that saw investor relief at the U.S.-China tariff truce give way to a cautious mood amid uncertainty over the shape of various trade deals, while the South Korean won steadied after sharp moves.
The Asian currency was volatile overnight as investors weighed the news that officials from South Korea and the U.S. met last week to discuss the dollar/won exchange rate.
But a report from Bloomberg that Washington is not negotiating for a weaker dollar as part of tariff talks helped calm the currency markets. Still, concerns that the U.S. administration could push for a weaker dollar is likely to keep investors wary.
The sudden lurch in the won was reminiscent of an unprecedented two-day surge in Taiwan's currency at the start of May, which coincided with the end of U.S.-Taiwan trade talks in Washington that fuelled speculation of an agreement to weaken the greenback in return for trade concessions.
"Reports of currency discussions between the U.S. and South Korea, coupled with signs the Trump administration may tolerate a weaker dollar, have fuelled won sentiment," said Kieran Williams, head of Asia FX at InTouch Capital Markets.
"Broader uncertainty around the domestic outlook and trade tensions could temper the won's upside near term."
While the dollar has clawed back some of its recent losses against the euro, pound and the yen that were driven by concerns over Trump's economic policies, it has slipped against most of the emerging market currencies.
The won was last at 1,410.70 per U.S. dollar after a 0.6% rise in the previous session. The Mexican peso was last at 19.38 per dollar, hovering near the seven-month high it scaled in the previous session.
The Japanese yen strengthened a bit to 146.48 per dollar but remained close to the one-month low of 148.65 touched earlier this week.
The dollar index, which measures the U.S. unit against six other currencies, was steady at 101, on course for the fourth straight week of gains.
Investor focus on Thursday will be on retail sales data while they look for more details on possible trade deals after easing of tensions between the U.S. and China.
The two countries on Monday announced a 90-day pause on most of the tariffs imposed on each other's goods since early April, leading to a brief relief rally.
"We consider there is more upside to the dollar in the near term as market participants reassess the outlook for the U.S. and global economies following the temporary U.S.-China trade deal," said Kristina Clifton, an economist at the Commonwealth Bank of Australia.
"The USD index could lift by another 2%-3% in the next few weeks. We expect the euro, pound and yen to bear the brunt of the dollar's recovery."