Dollar firms against peers as investors brace for Trump tariff deadline
Most U.S. trade partners face the prospect of steeper duties at the end of the 90-day moratorium on U.S. President Donald Trump's "Liberation Day" reciprocal tariffs on Wednesday.
Trump clarified on Sunday that the new rates would take effect from August 1.
He said he will name some dozen countries later on Monday that are receiving letters with their new, higher levies, and he threatened an additional 10% tariff on nations aligning with what he deemed to be the "anti-American" policies of the BRICS emerging economies.
"It still feels like this administration is trying to find ways to avoid going all out on fresh tariff positions. We have people talking a (lot) about it, but talking and doing are two entirely different things," said Chris Beauchamp, chief market analyst at IG.
"They (the United States) saw what happened with the volatility in April, and I don't think they want to wish that again."
Options data reflected that currency markets were pricing in a limited resurgence in volatility ahead of the tariff deadline on expectations further extensions on the deadline were possible.
The dollar index, which measures the currency against six major counterparts, rose 0.34% to 97.294 and briefly hit a one-week high.
The index extended gains from last week when data reflecting labour market resilience pushed back expectations for imminent monetary policy easing by the Federal Reserve.
Still, the index is close to a 3-1/2-year trough and has declined 10% so far this year as investors questioned the safe-haven status of the U.S. currency and reassessed earlier expectations that the U.S. could be spared in the event of a global economic slowdown.
The dollar inched up 0.25% to 0.797 against the Swiss franc on Monday, near the January 2015 low it revisited in the previous week.
The euro slipped 0.41% to $1.1738 having rallied over 13% so far this year. The dollar reversed an earlier decline and rose 0.78% at 145.725 yen, reaching a one-week high.
Investors are concerned that Tokyo and Brussels might not be able to secure deals with Washington ahead of the deadline as progress on agreements with Japan and the European Union has been slow, despite multiple rounds of negotiations.
Sterling weakened 0.08% to $1.364, but stayed near its strongest level since October 2021.
Currencies positively correlated to risk appetite, such as the Aussie dollar and the New Zealand dollar lost 0.61% and 0.63%, respectively ahead of monetary policy decisions in both countries in the coming two days.
The Reserve Bank of Australia is widely expected to cut the cash rate by another quarter point on Tuesday, while New Zealand's central bank is predicted to hold rates steady on Wednesday.
U.S. policy uncertainty weighing on the dollar "may not be as potent as in early April, but we think this correlation still matters," Paul Mackel, global head of FX research at HSBC said.
(Reporting by Hannah Lang and Johann M Cherian; additional reporting by Kevin Buckland; Editing by Christian Schmollinger, Rachna Uppal, Gareth Jones and Barbara Lewis)
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