US dollar retreats from 2-year high as Trump touts ‘tremendous’ tariff power, but holds off on swift action
The US dollar (DX = F, DX-Y.NYB) fell more than its highest levels in approximately two years on Friday, and fell to the lowest level in a month after President Trump said he was “preferred not” to impose customs duties on China.
“We have a very large force on China, which is customs duties, and they do not want it,” Trump said in an interview with Fox News on Thursday. And I prefer not to have to use it. But it is a tremendous force for China.
The US dollar index, which measures the value of the dollar against a basket of six foreign currencies – the euro, the Japanese yen, the pound sterling, the Canadian dollar, the Swedish Carona and the Swiss franc – decreased by more than 0.5 % on Friday to conclude its worst week. In more than a year. The dollar has witnessed its largest decline in one day since November 2023 earlier this week, when the president declined to activate wide -ranging definitions on his first day in office.
However, the index rose about 7% since its lowest level in September, and rose by 4% since the election day.
The dollar price movement was largely driven by a major mirror: the election of Trump and the sweeping of the subsequent Republicans, as well as re -calibration of future federal facilities in the face of strong economic data.
But the unknown regarding Trump’s customs policy was the largest engine in recent weeks and it seems that he will remain in this way in the coming months.
Despite the recent moves towards the declining direction, analysts at Bank of America say it is still reasonable for the market to continue to pricing the risk of customs tariffs when it comes to dollars.
“Even if the definitions are late, it is likely to be a major political pillar for the new administration,” said Adar Sinha, the chief foreign currency strategy and interest rates at Bank of America. “And most importantly, the uncertainty about the timing of increased customs duties is still existing.”
Read more: What are the definitions and how do you affect you?
Meanwhile, Capital Economics expects that the dollar index will rise more this year, noting that when adjusting it according to inflation, the dollar is at its strongest levels since the signing of the international agreement supporting growth. Plaza Agreement, In 1985.
“We believe that the American customs duties and transformations in interest rates can push the dollar to rise more in the coming quarters,” said Simon Mac Adam, the chief global economist at Capital Economics on Friday.
Kyle Chapman, a foreign currency analyst at the Palinger Group, added that the dollar is “incredibly sensitive to customs tariffs at the present time.”
Instead, Trump refused to activate the customs tariff matter during his first day in his position Memorandum issuance On Monday, federal agencies are directed to evaluate US trade policy.
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