Dollar Steady as Traders Assess Tariffs; Yen Rises on BOJ Rate Hike Expectations

The dollar weakened against various currencies as traders evaluated U.S. President Donald Trump’s new tariff proposals, while the yen surged to a two-month high amid rising expectations for further rate hikes from the Bank of Japan (BOJ). The dollar index dropped 0.2% to 106.92, but is still set for a weekly gain.

The yen rose 0.8% to 150.27 against the dollar, influenced by concerns over the tariffs and market speculation about BOJ rate increases. Traders are also monitoring geopolitical tensions, especially following Trump’s criticism of Ukrainian President Zelenskiy. Additionally, Trump suggested a potential new trade deal with China, noting an expected visit from President Xi Jinping. The Australian dollar rose 0.49%, reflecting a mixed jobs report, while the New Zealand dollar increased 0.44%. The euro and sterling also saw slight movements against the dollar and yen, respectively.

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• Dollar and Yen Strengthen Amid Tariff Concerns and Russia-Ukraine Talks

Dollar Steady as Traders Assess Tariffs; Yen Rises on BOJ Rate Hike Expectations

The dollar has softened against various currencies as traders evaluate U.S. President Donald Trump’s latest tariff proposals. In contrast, the yen has surged to a two-month high, driven by increasing expectations for additional rate hikes from the Bank of Japan (BOJ).

The dollar index fell by 0.2% to 106.92 but is still poised for a weekly gain of 0.2%, following a decline of 1.2% last week. The yen appreciated to over a two-month high against the dollar, which dropped 0.8% to 150.27, briefly dipping below the 150 mark. This movement is largely attributed to concerns over Trump’s tariffs and rising speculation regarding BOJ rate hikes.

Against the euro, the yen gained up to 1%, although it was also on track for its largest daily drop since January 27. BOJ Governor Kazuo Ueda recently met with Japanese Prime Minister Shigeru Ishiba to discuss the economy and financial markets.

Bank of Singapore currency strategist Moh Siong Sim noted that there isn’t a single reason for the yen’s rise, but the lack of discussion about increasing long-term interest rates in their meeting may have reassured investors. This could signal a potential for more yen strength and an upcoming BOJ hike.

Trump announced plans to impose tariffs on additional products, including lumber and forest goods, which has affected the dollar’s strength. Commerzbank’s currency analyst, Michael Pfister, pointed out that while the dollar is weakening, it is not as significant as the initial market reaction to Trump’s earlier tariff announcements regarding Mexico and Canada.

Traders are also keeping an eye on geopolitical tensions, particularly following Trump’s criticism of Ukrainian President Volodymyr Zelenskiy, which has raised concerns among European officials. Furthermore, Trump indicated that a new trade deal between the U.S. and China is possible, mentioning an expected visit from Chinese President Xi Jinping without specifying a date.

The Australian dollar rose 0.49% to $0.63765, influenced by a mixed jobs report that showed strong employment growth but a slight increase in the unemployment rate. The New Zealand dollar also climbed 0.44% to $0.57300. The euro was last at 156.805 against the yen and down 0.2% against the dollar at $1.0426, while sterling increased 0.21% to $1.26125.

Analysts are closely monitoring the impact of Trump’s tariffs on trade relationships and their potential influence on global market dynamics. The uncertainty surrounding U.S.-China trade relations could lead to fluctuations in commodity prices, particularly in sectors heavily reliant on trade with China. Market participants are also cautious about how geopolitical developments may affect investor sentiment, particularly in light of recent tensions in Eastern Europe. As the situation evolves, traders are advised to stay informed about economic indicators and central bank policies that could further influence currency movements.

Dollar and Yen Strengthen Amid Tariff Concerns and Russia-Ukraine Talks

Safe-haven currencies, particularly the U.S. dollar and Japanese yen, strengthened on Wednesday as market uncertainty grew due to new tariff threats from U.S. President Donald Trump and ongoing negotiations over the Russia-Ukraine war.

The dollar slipped further against the yen following the release of Federal Reserve meeting minutes, which highlighted concerns that Trump’s policy proposals could drive inflation higher. The Fed also reaffirmed its stance on maintaining a pause in rate cuts.

While the dollar gained against risk-sensitive currencies like the euro, British pound, Australian dollar, and emerging market currencies, it declined against the yen. The yen appreciated against major currencies, including the dollar, euro, Swiss franc, and sterling.

Investor concerns escalated after Trump announced plans for a 25% tariff on automobiles, semiconductors, and pharmaceutical imports, with auto tariffs expected to take effect by April 2. Chester Ntonifor, chief FX and global fixed income strategist at BCA Research, noted that the dollar’s movement aligns with patterns seen during Trump’s previous administration, as markets react to his trade policies.

The dollar weakened by 0.4% against the yen, trading at 151.495, while the euro fell 0.6% to 157.925 yen. Earlier losses in the dollar followed data showing an 8.4% decline in U.S. single-family home construction in January, attributed to winter weather disruptions.

The euro slipped 0.2% to $1.0424, while the dollar index rose 0.2% to 107.18, recovering some ground after dropping 1.2% last week. Meanwhile, the British pound briefly gained on stronger-than-expected UK inflation, which hit a 10-month high of 3% in January, before slipping to $1.2585, down 0.2%.

Regarding geopolitical developments, the Trump administration agreed to further negotiations with Russia on the Ukraine conflict, in contrast to its previous stance of rallying allies against Russian President Vladimir Putin. Trump and Ukrainian President Volodymyr Zelenskiy exchanged criticisms, with Zelenskiy rejecting Trump’s claim that Ukraine was responsible for the war, while Trump accused him of leading without elections.

Market analysts suggested that if a peace agreement between Russia and Ukraine is reached, the dollar could face renewed pressure.

Elsewhere, the Reserve Bank of New Zealand cut its benchmark interest rate by 50 basis points to 3.75% as expected. However, signals of smaller future rate cuts provided some support for the New Zealand dollar.