U.S. Dollar Rebounds from 11-Week Low Amid Tariff Uncertainty and Weak Economic Data

Bitcoin remained stable at $88,558 after a 5.6% drop on Tuesday, hitting a three-month low of $86,003.11. Market uncertainty over upcoming U.S. tariffs has contributed to investor caution, alongside expectations of Federal Reserve rate cuts. The dollar’s rebound and rising Treasury yields have pressured riskier assets, including cryptocurrencies. Additionally, last week’s $1.5 billion hack of ether from the Bybit exchange has further shaken confidence in digital asset security. Analysts are watching Bitcoin’s key support levels, with a break below $86,000 potentially triggering further declines.

U.S. Dollar Rebounds from 11-Week Low Amid Tariff Uncertainty and Weak Economic Data

The U.S. dollar rebounded from an 11-week low against major currencies on Wednesday, supported by a recovery in short-term Treasury yields despite ongoing weak economic data that has unsettled investors.

Meanwhile, the Canadian dollar dropped to a two-week low, and the Mexican peso also weakened ahead of new tariffs set to take effect next week under President Donald Trump’s administration. Analysts at DBS noted the volatility in currency markets, emphasizing that recent data misses could continue to pressure yields downward.

The U.S. dollar index, which tracks the greenback against six major peers, climbed 0.3% to 106.51 in the Asian afternoon session, recovering from this week’s low of 106.13—the weakest level since December 10. On Tuesday, the index had fallen 0.5% after the U.S. Conference Board reported a sharp drop in consumer confidence to 98.3, the steepest decline since August 2021 and well below economists’ expectations of 102.5.

Market expectations now lean toward two quarter-point interest rate cuts by the Federal Reserve this year, with the first likely in July. The two-year U.S. Treasury yield, which hit a low of 4.074% on Tuesday—the weakest since November 1—rose to 4.1271% on Wednesday.

Tapas Strickland, head of market economics at National Australia Bank, noted that U.S. data is increasingly underperforming, casting doubt on the “U.S. exceptionalism” narrative that has supported the dollar. Treasury Secretary Scott Bessent also highlighted economic fragility beneath the surface, citing interest rate fluctuations, persistent inflation, and a government-driven job market while emphasizing tariffs as a key revenue source.

Trump confirmed on Monday that tariffs on Canada and Mexico would move forward as planned starting March 4. In response, the U.S. dollar climbed to C$1.4332—its strongest since February 12—and rose 0.1% to 20.4909 Mexican pesos. Against the Japanese yen, the dollar gained 0.3% to 149.41, recovering from Tuesday’s five-month low of 148.56.

The euro edged down 0.2% to $1.0492 after peaking at $1.0528 on Monday. While optimism around increased government spending in Germany has provided some support for the euro, election winner Friedrich Merz ruled out immediate changes to borrowing limits and remained uncertain about pushing through a large military budget.

Sterling declined 0.2% to $1.2640 after hitting a two-month high of $1.2690 earlier in the week. The Australian dollar also fell 0.3% to $0.6324 following data indicating a month-on-month decline in consumer price growth for January, suggesting a cooling inflation trend that could ease pressure on the central bank.

Bitcoin held steady at $88,558 on Wednesday after experiencing a sharp 5.6% drop on Tuesday, when it touched a three-month low of $86,003.11. The recent slump in the cryptocurrency market has been fueled by growing concerns over U.S. trade policies, particularly the upcoming tariffs on Canada and Mexico, which have heightened market uncertainty.

Investors remain cautious as broader macroeconomic pressures, including expectations of Federal Reserve interest rate cuts, continue to influence risk sentiment. With the dollar gaining strength and Treasury yields rebounding, traders have been shifting capital away from riskier assets such as cryptocurrencies.

Adding to market jitters, last week’s $1.5 billion hack of ether from the Bybit exchange has further shaken investor confidence. The security breach is one of the largest crypto hacks in recent history, raising renewed concerns about the vulnerabilities of digital asset platforms. The incident has led to increased scrutiny from regulators and calls for stricter security measures across crypto exchanges.

Despite these headwinds, Bitcoin has managed to hold above key support levels, with analysts closely watching whether it can sustain its current range. A break below $86,000 could signal further declines, while a recovery above $90,000 might restore bullish momentum in the short term.