US dollar declines as traders assess tariff outlook
TOKYO :The U.S. dollar edged lower on Monday, giving back some of its gains from last week, as markets weighed the outlook for President Donald Trump's tariff policy and its potential to constrict growth and unleash inflation.
The greenback starts the week on the back foot after Trump said late on Friday that he plans to double duties on imported steel and aluminum to 50 per cent from Wednesday.
The U.S. currency has been whipsawed for weeks by Trump's on-again-off-again trade war, falling when a flare up in tensions stokes worries of a potential U.S. recession.
The dollar witnessed weekly tumbles of 3 per cent against major peers in the days after the April 2 "Liberation Day" tariffs and 1.9 per cent two weeks ago, when Trump threatened 50 per cent levies on Europe.
Last week, the greenback got a bit of respite, rising 0.3 per cent after talks with the European Union got back on track and a U.S. trade court blocked the bulk of Trump's tariffs on the grounds that he overstepped his authority.
Although an appeals court reinstated the duties a day later as it considers the case, and Trump's administration said it had other avenues to implement the levies if it loses in court, many analysts said it shows there are still checks in place on the President's power.
The dollar dropped 0.3 per cent to 143.57 yen as of 0023 GMT, giving back some of its more than 1 per cent rally from last week.
The euro gained 0.2 per cent to $1.1372, and sterling advanced 0.3 per cent to $1.3489.
The Australian dollar added 0.3 per cent to $0.6454.
The U.S. dollar index, which measures the currency against six major peers, eased 0.2 per cent to 99.214.
The dollar has also been weighed down by fiscal worries in recent weeks, amid a broad "Sell America" theme that has seen dollar assets from stocks to Treasury bonds dropping.
Those concerns come into particular focus this week as the Senate starts considering Trump's sweeping tax cut and spending bill, which will add an estimated $3.8 trillion to the federal government's $36.2 trillion in debt over the next decade.
Many senators have already said the bill will need major revisions, and Trump said he welcomes changes. The fate of section 899 of the bill could be crucial, according to Barclays analysts.
"S899 would give the U.S. free rein to tax companies and investors from countries deemed to have 'unfair foreign taxes' (and) could be seen as a tax on the U.S. capital account at a time when investor nervousness towards U.S. assets has grown," they said in a research report.
"Actively reducing foreigners' total return on their U.S. investments would dent inflows and weigh on the dollar, all else equal," they added.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CNA
22 minutes ago
- CNA
Wall Street edges higher, dollar bounces back amid tariff talks, economic data
NEW YORK :Wall Street edged higher and the dollar rebounded on Tuesday as market participants looked past ongoing tariff wrangling and lowered economic expectations ahead of Friday's crucial U.S. employment report. All three major U.S. stock indexes were up modestly while gold backed down from a near four-week high in opposition to the strengthening greenback. "Today is a day with no big drivers," said Tim Ghriskey, senior portfolio strategist Ingalls & Snyder in New York. "The market is becoming more comfortable with Trump's negotiation style. He comes out with guns blazing and then is, you know, very happy to, you know, put his guns away, having made his point. "He expects a reasonable settlement at least, which he'll call a huge win, of course," Ghriskey added. "But in reality he's not looking to punish our trading partners; he's looking for incremental adjustments to tariffs." The Organization for Economic Cooperation and Development (OECD) said the global economy is on course for a more drastic slowdown than it expected only a few months ago. It cited the fallout from Trump's trade war, and warned that growth will be even weaker as protectionism increases, fuelling inflation and disrupting supply chains. That sentiment was shared by the United Nations' International Labor Organization (ILO), which downgraded its global employment forecast due to worsening economic conditions arising from trade tensions. In economic data, a report from the U.S. Labor Department showed the number of unfilled U.S. jobs unexpectedly rose in April, while new orders for factory-made goods posted a steeper drop than analysts anticipated. Investors are now training their focus on the May employment report, expected on Friday. Economists polled by Reuters expect the U.S. economy added 130,000 jobs last month, with the unemployment rate standing pat at 4.2 per cent. The Dow Jones Industrial Average rose 30.12 points, or 0.07 per cent, to 42,334.83, the S&P 500 rose 12.36 points, or 0.21 per cent, to 5,948.30 and the Nasdaq Composite rose 100.78 points, or 0.52 per cent, to 19,343.39. European stocks were moderately lower as investors exercised caution while awaiting further developments in tariff negotiations, but pared losses in the wake of a report that Euro Zone inflation has eased below the European Central Bank's (ECB) target, paving the way for further policy easing. MSCI's gauge of stocks across the globe rose 0.37 points, or 0.04 per cent, to 883.25. The pan-European STOXX 600 index fell 0.13 per cent, while Europe's broad FTSEurofirst 300 index fell 1.85 points, or 0.09 per cent. Emerging market stocks rose 3.26 points, or 0.28 per cent, to 1,157.03. MSCI's broadest index of Asia-Pacific shares outside Japan closed higher by 0.37 per cent to 609.76, while Japan's Nikkei fell 23.86 points, or 0.06 per cent, to 37,446.81. The dollar bounced back from a six-week low, even as concerns persisted over potential economic damage in the wake of Trump's trade war. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.58 per cent to 99.15, with the euro down 0.49 per cent at $1.1386. Against the Japanese yen, the dollar strengthened 0.74 per cent to 143.75. Yields on 10-year U.S. Treasuries dipped but were off their lows in the wake of weaker than expected U.S. economic data. The yield on benchmark U.S. 10-year notes fell 2.2 basis points to 4.44 per cent, from 4.462 per cent late on Monday. The 30-year bond yield fell 3.3 basis points to 4.9614 per cent from 4.995 per cent late on Monday. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 0.8 basis points to 3.953 per cent, from 3.945 per cent late on Monday. Crude prices extended their gains, supported by roiling geopolitical concerns as the war in Ukraine intensified and Iran appeared poised to reject a U.S. nuclear deal proposal. U.S. crude rose 1.87 per cent to $63.69 a barrel and Brent rose to $65.68 per barrel, up 1.62 per cent on the day. Gold prices retreated from a near four-week high amid profit-taking and in opposition to the strengthening dollar.
CNA
an hour ago
- CNA
Palantir defies tech gloom as Trump momentum powers stellar share gains
Palantir Technologies has succeeded where most tech stocks have struggled this year: staying hot in a cooling market. The company's military-grade AI tools along with its deep defense ties and high-level government connections at a time when the U.S. is boosting spending on defense software have helped investors raise the bets on the stock. It has surged more than 70 per cent this year and is the S&P 500's second-best performer - a standout in an otherwise sluggish tech market roiled by investor worries over U.S. tariffs and economic uncertainty. Palantir co-founder Peter Thiel was an early backer of President Donald Trump and has close ties with key Washington lawmakers, including Vice President JD Vance, whom he supported in a 2022 U.S. Senate race. "The relationships that Palantir's with senior members of the Trump administration are helpful for business," D.A. Davidson analyst Gil Luria said. Palantir in April won a $30 million contract from the U.S. Immigration and Customs Enforcement to develop an operating system that identifies undocumented immigrants and tracks self-deportations, its largest single award from the agency among 46 federal contract actions since 2011. "They probably benefit a little bit more with Trump because of the impetus on security, border and immigration," said Francisco Bido, senior portfolio manager at Palantir investor F/m Investments. "They're going to get a lot of work out of that." Palantir, however, downplayed the impact of political goodwill. "The politics around it change, so it gets increased visibility but we've been working with ICE since 2010," the company's communications head, Lisa Gordon, told Reuters. Founded in 2003 and listed in 2020, Palantir, which was initially backed by the CIA, has drawn investor interest in its growing AI platform that allows companies to simulate AI-related scenarios, debug code and test large language models. "No other large software company can currently combine that level of growth with high profitability and unique offering," Luria said. But its growth has largely been driven by U.S. government contracts which made up for more than 42 per cent of its revenue in the March quarter. Sales to U.S. businesses accounted for 29 per cent, while commercial sales outside the U.S. were down 5 per cent from a year ago - a slide that some analysts point to Palantir's polarizing political profile and America-first stance. The rally in its stock builds on a 12-fold surge over the past two years that outpaced gains in red-hot companies such as Nvidia and brings with it a valuation premium.
Business Times
an hour ago
- Business Times
US factory orders slump in April
[WASHINGTON] New orders for US-manufactured goods dropped sharply in April and business spending on equipment appeared to have lost momentum at the start of the second quarter as the boost from front-loading of purchases ahead of tariffs faded. Factory orders fell 3.7 per cent after an unrevised 3.4 per cent jump in March, the Commerce Department's Census Bureau said on Tuesday (Jun 3). Economists polled by Reuters had forecast factory orders declining 3.1 per cent. They rose 2 per cent on a year-on-year basis in April. Manufacturing, which accounts for 10.2 per cent of the economy, has been pressured by President Donald Trump's aggressive tariffs. An Institute for Supply Management survey on Monday showed manufacturing contracted for a third straight month in May and suppliers took the longest time in nearly three years to deliver inputs to factories. Trump sees the tariffs as a tool to raise revenue to offset his promised tax cuts and to revive a long-declining industrial base, a feat that economists argued was impossible in the short term because of labour shortages and other structural issues. Commercial aircraft orders plunged 51.5 per cent in April. Orders for motor vehicles, parts and trailers dropped 0.7 per cent, helping to depress transportation equipment orders by 17.1 per cent. Orders for computers and electronic products gained 1 per cent, while those for electrical equipment, appliances and components slipped 0.3 per cent. Machinery orders rose 0.6 per cent. Excluding transportation, orders fell 0.5 per cent, matching March's decline. The government also reported that orders for non-defence capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, decreased 1.5 per cent in April rather than 1.3 per cent as estimated last month. Shipments of these so-called core capital goods fell by an unrevised 0.1 per cent. Business spending on equipment rebounded sharply in the first quarter, largely driven by front-running of information processing equipment ahead of tariffs. REUTERS
