The U.S. dollar experienced a decline against major currencies as investors evaluated President Trump's recent tariff announcements. Concurrently, the yen appreciated, reaching an 11-week high against the dollar, driven by increased expectations of further rate hikes by the Bank of Japan (BOJ).
Recent U.S. data, including initial jobless claims aligning with forecasts and a report on slowed factory output growth in the mid-Atlantic region, had a negligible effect on the currency market. These reports did not alter the prevailing view that the Federal Reserve would maintain its current stance for the coming months.
Tariffs continue to be a focal point for currency investors, even as their immediate impact appears diminished. Trump indicated plans to introduce new tariffs within the month, targeting lumber and forest products, in addition to previously announced duties on imported cars, semiconductors, and pharmaceuticals.
Paresh Upadhyaya of Amundi U.S. noted, "The market has reached tariff fatigue where it's just not reacting...as it did right after the election in November, December, and even in January." He further commented, "It's now operating using the government shutdown playbook, where everyone thinks they have seen this dog-and-pony show before and expects the same thing."
In trading, the euro advanced 0.7% against the dollar to $1.0499, while the greenback fell 0.7% against the Swiss franc to 0.8979 franc. The dollar's earlier dip followed data indicating a rise in initial claims for state unemployment benefits by 5,000 to 219,000 for the week ending February 15, slightly above the forecasted 215,000 claims.
Meanwhile, the yen's rise to an 11-week peak of 149.40 per dollar was primarily due to safe-haven buying amid concerns over Trump's tariffs and anticipated BOJ rate hikes. The euro also decreased against the yen, falling to a more than one-week low at 157.21 yen.
BOJ Governor Kazuo Ueda's meeting with Prime Minister Shigeru Ishiba suggested no governmental opposition to rate hikes, aligning with market expectations. David Rosenberg of Rosenberg Research stated, "We have been early and patient with the bullish call on the yen and are sticking with it - the currency should be far closer to 120 or 130 yen."
Geopolitical tensions also influenced markets, with Trump and Ukrainian President Zelenskiy exchanging remarks. However, Zelenskiy later expressed a willingness to collaborate on investment and security agreements with the U.S.
In other developments, the Australian and New Zealand dollars gained following positive China-related news, with the Aussie trading at US$0.6401 and the New Zealand dollar at US$0.5764. Sterling also rose, reaching $1.2664 against the dollar.
Source: Reuters