US Dollar Faces Pressure as Tariffs Escalate and China Sets 5% Growth Goal

USDX

Image Credit: CNN

The U.S. dollar fell to near a three-month low against major currencies on Wednesday, while Asian stocks showed mixed results after the latest round of tariffs imposed by the U.S. and retaliatory measures from Canada and China raised concerns about a worsening trade war.

China’s yuan remained steady in offshore trading following a 0.7% gain in the previous session, as the National People’s Congress (NPC) commenced with China maintaining its 5% economic growth target for 2025. The euro reached a near four-month high after German political parties agreed to establish a 500-billion-euro infrastructure fund. The British pound also held strong, nearing a three-month peak.

Crude oil prices dropped to six-month lows, while Bitcoin stabilized around $87,000 after a volatile week.

“Market fears about weaker U.S. and global economic conditions are showing in the markets, with cyclical sectors leading the sell-off,” said Kyle Rodda, senior financial markets analyst at Capital.com. “This uncertainty is enough to keep investors on edge, with businesses and consumers in the U.S. likely feeling the same.”

Australian stocks dropped 0.9%, while Japan’s Nikkei slipped 0.2%, reversing early gains. Futures for Hong Kong’s Hang Seng Index were up by 0.6%.

Overnight, the U.S. S&P 500 fell 1.2%, but futures were up by 0.6% on Wednesday. MSCI’s world equity index inched up 0.1%, though it remained 1.9% lower for the week.

The tariffs imposed by U.S. President Donald Trump, including 25% levies on imports from Mexico and Canada and a 20% increase on Chinese goods, came into effect on Tuesday. In response, China and Canada retaliated, while Mexico’s President Claudia Sheinbaum vowed to take similar actions, without offering specifics.

The U.S. dollar index, which measures the currency against a basket of major currencies, was little changed at 105.60, following a two-day drop of 1.9%, which pushed it to 105.49, its lowest point since December 6.

The euro reached $1.0637, its highest level since November 13, while sterling remained steady at $1.2786, near Tuesday's high of $1.27995, the highest since December 6.

Germany’s conservative and Social Democratic parties proposed the creation of a 500-billion-euro infrastructure fund, along with changes to borrowing rules to boost defense spending.

The offshore Chinese yuan dipped slightly by 0.1% to 7.2604 per dollar. U.S. West Texas Intermediate (WTI) crude dropped 0.6% to $67.83.

Paraphrasing text from "Reuters" all rights reserved by the original author