Dollar set for first monthly gain of 2025 as trade deals ease uncertainty
The dollar rose against the yen, trading at its highest level since May 28. It is on track to gain about 5 per cent for July, making it the biggest monthly increase since December 2024. It was last up 0.83 per cent at 150.765.
In a widely expected move, the Bank of Japan on Thursday kept short-term interest rates steady at 0.5 per cent by a unanimous vote, but revised up its inflation forecasts for the next few years.
That came after the Federal Reserve left U.S. interest rates unchanged on Wednesday, ignoring persistent calls by President Donald Trump to lower borrowing costs. Fed Chair Jerome Powell also indicated he was in no rush to cut rates.
The greenback has been bolstered by a hawkish Fed and U.S. economic resilience, with uncertainty over Trump's chaotic tariffs easing after an array of trade deals.
The dollar index was up 0.16 per cent at 99.949 after rising nearly 1 per cent in the previous session. It is on track for the first monthly gain in 2025.
"There's been a clash and a friction between what the Fed is seeing and deciding to do, and what the White House and perhaps a lot of people in the equity market want the Fed to do," said Juan Perez, director of trading of Monex USA in Washington.
"If we had left the hawkish tone, the hawkish stance, and the hawkish press conference altogether, it makes sense to see the U.S. dollar rise - which it did. But today, because of the friction between the Fed and the White House, the dollar is once again hitting the brakes," Perez added.
Data showed that the number of Americans filing new applications for unemployment benefits increased just marginally last week, suggesting that the U.S. labor market remained stable.
The euro has been one of the biggest casualties of the dollar's ascent this month, as investors have rushed to unwind bets laid on earlier this year on the premise that the European market may offer better opportunities.
The euro was last up 0.19 per cent at $1.1426, having hit a seven-week low on Wednesday. Still, it remained on track to lose nearly 3 per cent this month.
"I think there was too much optimism in the price of the euro. And I think that's come back this week. There's been a lot of commentary about how the EU conceded to the U.S. on this trade deal and that's been a dose of reality for the Europeans," Rabobank strategist Jane Foley said.
The dollar weakened 0.31 per cent against the Swiss franc to 0.812 franc but it is on track to gain 2.36 per cent for the month.
The European Union's agreement on Sunday to 15 per cent tariffs on U.S. exports has cleared up a lot of uncertainty.
BOJ Governor Kazuo Ueda also said the U.S.-Japan trade deal reduced uncertainty on the outlook and heightened the likelihood of Japan durably hitting the BOJ's 2 per cent inflation target - a prerequisite for further rate hikes.
New U.S. trade deals included one with South Korea, which Trump said on Wednesday would pay a 15 per cent tariff on U.S. imports. That was lower than a threatened 25 per cent and the Korean won strengthened on the news and last stood at 1,395.21 per dollar.
Trump on Wednesday also slapped a 50 per cent tariff on most Brazilian goods and said the United States is still negotiating with India. But he gave Mexico a 90-day reprieve ahead of his Friday deal deadline.
"We do however continue to expect that the tariff rates now being announced and codified will ultimately prove to be more dollar negative, even if some of the bilateral announcements (particularly on the EU) likely catalysed the striking dollar rebound so far this week," Goldman Sachs analysts led by Stuart Jenkins wrote in an investor note.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Straits Times
7 hours ago
- Straits Times
Adriana Kugler resigning from US Fed, opening door to Trump appointment
Sign up now: Get ST's newsletters delivered to your inbox Ms Adriana Kugler will exit the central bank on Aug 8, before the conclusion of her term. WASHINGTON - The Federal Reserve said on Aug 1 that governor Adriana Kugler is resigning early from her term and will exit the central bank on Aug 8, potentially shaking up what was already a fractious succession process for Fed leadership amid difficult relations with President Donald Trump. The Fed said in a statement that Ms Kugler, who became a governor in September 2023, will leave before her term's conclusion, which was scheduled for Jan 31, 2026. In a press release, the Fed said Ms Kugler will return to Georgetown University as a professor next autumn. Ms Kugler did not attend this week's rate-setting Federal Open Market Committee meeting. Ms Kugler's early departure may shake up the timeline for the succession process now surrounding Fed chair Jerome Powell, whose term ends in May 2026. Mr Trump has threatened to fire Mr Powell repeatedly, believing interest rates should be much lower than they are. Mr Trump will now get to select a Fed governor to replace Ms Kugler and finish out her term. Top stories Swipe. Select. Stay informed. Tech Reporting suspected advanced cyber attacks will provide a defence framework: Shanmugam Business Singapore's US tariff rate stays at 10%, but the Republic is not out of the woods yet Asia Asia-Pacific economies welcome new US tariff rates, but concerns over extent of full impact remain Business ST explains: How Trump tariffs could affect Singapore SMEs, jobs and markets Asia Indonesia's Mount Lewotobi Laki-laki erupts Singapore Thundery showers expected on most days in first half of August Singapore Synapxe chief executive, MND deputy secretary to become new perm secs on Sept 1 Singapore 5 women face capital charges after they were allegedly found with nearly 27kg of cocaine in S'pore Some speculation has centred on the idea Mr Trump might pick a potential future chair to fill that slot as a holding place. The White House did not immediately respond to a request for comment about the Fed appointment, although Mr Trump said later he was happy to have an open slot to fill. 'I would not read any political motivation into what (Kugler is) doing, although the consequence of what she's doing is she's calling Trump's bluff,' said Mr Derek Tang, an analyst at LH Meyer, a research firm. 'She's putting the ball in his court and saying, look, you're putting so much pressure on the Fed, and you want some control over nominees, well, here's a slot.' The mechanics of filling the soon-to-be open governor role have a number of moving parts that make it hard to say how Mr Trump will approach finding a replacement for Ms Kugler. Mr Tang noted the president could even fill the position temporarily with a recess appointment while the Senate, responsible for confirming Board of Governors officials, is not in session. There's also some uncertainty about what would happen to someone quickly confirmed to the role given that the term ends early in 2026, although some Fed observers noted a governor can stay in office in an expired term until a replacement has been confirmed. Over recent days, Mr Trump's rhetoric about the Fed has remained heated - he called Mr Powell on Aug 1 'a stubborn MORON' - but he appears to have backed away from his threats to fire the central bank leader. Challenging term In a letter to Mr Trump announcing her resignation, Ms Kugler wrote 'I am proud to have tackled this role with integrity, a strong commitment to serving the public, and with a data-driven approach strongly based on my expertise in labour markets and inflation.' Ms Kugler's time at the Fed was a challenging one as central bankers raised rates aggressively to combat high inflation pressures. Those high rates have put them in the crosshairs of Mr Trump and have caused economic challenges, although inflation pressures have moved much closer to the central bank's 2 per cent target. At the FOMC meeting this week, the Fed maintained its interest rate target range at between 4.25 per cent and 4.5 per cent as policymakers stayed on the sidelines to see how Mr Trump's aggressive regime of large import tax increases will affect the economy and inflation pressures. Two Fed officials opposed that stance and wanted a rate cut, worried that risks to the job market are rising and that the inflation threat posed by tariffs is transient. The Fed's dissenters found some support for their concerns in the release on Aug 1 of weaker-than-expected jobs data that was particularly notable for downward revisions to prior month's job gains. Some Fed officials who spoke on Aug 1 noted the report with concern but said they need to see more evidence the job market is running into trouble before changing their views on monetary policy. Mr Trump reacted to the jobs data with a double-barrelled attack, hitting the Fed for not cutting rates while directing his staff to fire the commissioner of the Labour Department's Bureau of Labour Statistics, claiming - without evidence - the hiring numbers had been rigged. Mr Trump's move rattled markets and raised questions about the future integrity of one of the most important statistical reports financial markets rely upon.
CNA
7 hours ago
- CNA
Meta to share AI infrastructure costs via $2 billion asset sale
Meta Platforms is pressing ahead with efforts to bring in outside partners to help fund the massive infrastructure needed to power artificial intelligence, disclosing plans in a filing on Thursday to offload $2 billion in data center assets as part of that strategy. The strategy reflects a broader shift among tech giants — long known for self-funding growth — as they grapple with the soaring cost of building and powering data centers to support generative AI. The social media giant said earlier this week that it was exploring ways to work with financial partners to co-develop data centers to help finance its massive capital outlay for next year. 'We're exploring ways to work with financial partners to co-develop data centers,' Meta Chief Finance Officer Susan Li said on a post-earnings conference call on Wednesday. While the company still expects to fund much of its capital spending internally, some projects could attract 'significant external financing' and offer more flexibility if infrastructure needs shift over time, Li said. The company did not have any finalized transactions to announce, she said. The disclosure in Meta's quarterly filing, however, signals that plans are firming up. In its quarterly filing on Thursday, Meta said it had approved a plan in June to dispose of certain data center assets and reclassified $2.04 billion worth of land and construction-in-progress as "held-for-sale". These assets were expected to be contributed to a third party within the next twelve months for co-developing data centers. Meta did not record a loss on the reclassification, which values the assets at the lower of their carrying amounts or fair value less costs to sell. As of June 30, total held-for-sale assets stood at $3.26 billion, according to the filing. Meta declined to comment for this story. CEO Mark Zuckerberg has laid out plans to invest hundreds of billions of dollars into constructing AI data center 'superclusters' for superintelligence. 'Just one of these covers a significant part of the footprint of Manhattan,' he said. The Instagram and WhatsApp owner on Wednesday raised the bottom end of its annual capital expenditures forecast by $2 billion, to $66 billion to $72 billion.
CNA
8 hours ago
- CNA
Kugler Resigns From Fed, Opening Door to Trump Appointment
WASHINGTON: Federal Reserve Governor Adriana Kugler will step down from her post on Aug 8, the US central bank said Friday (Aug 1), creating a vacancy that could allow President Donald Trump to begin reshaping the Fed's leadership amid tensions over interest rate policy. Kugler, who joined the Fed in September 2023, was originally set to serve until January 2026. The central bank said she will return to Georgetown University as a professor next autumn. Kugler did not attend this week's Federal Open Market Committee (FOMC) meeting, a move Fed watchers described as unusual. The central bank did not provide further comment on her early exit. Her resignation comes as Fed Chair Jerome Powell's term nears its May 2026 end. Trump, who has long criticized Powell and the Fed for maintaining high interest rates, has threatened to remove Powell and could use Kugler's vacancy to elevate a preferred candidate. Trump will now nominate a new governor to serve the remainder of Kugler's term. The White House did not immediately respond to a request for comment on who might be chosen. In a resignation letter to Trump, Kugler said: 'I am proud to have tackled this role with integrity, a strong commitment to serving the public, and with a data-driven approach strongly based on my expertise in labor markets and inflation.' Kugler's tenure was marked by the Fed's efforts to bring inflation under control through aggressive rate hikes. While inflation has recently moved closer to the Fed's 2% target, the central bank's high rates have become a source of political friction. At its latest meeting this week, the Fed left interest rates unchanged at 4.25% to 4.5%, opting to observe the economic effects of Trump's sweeping tariff increases before adjusting policy. Two FOMC members dissented, urging an immediate rate cut due to rising risks to the labor market and the belief that tariff-driven inflation would be temporary.
