Dollar Struggles as Trump Tariffs Spark Economic Concerns

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The dollar remained near a five-month low against major currencies on Wednesday, as concerns about the U.S. economy lingered due to President Donald Trump's unpredictable trade policies.

The euro stayed near a five-month high, buoyed by growing optimism for an end to the war in Ukraine. Meanwhile, the Canadian dollar experienced volatility after Trump initially vowed to double tariffs on steel and aluminum to 50%, only to reverse his decision a few hours later. The Bank of Canada was expected to cut interest rates by another quarter point at its policy meeting on Wednesday.

"Trade uncertainty remains, and with it, market volatility," said Kyle Rodda, senior financial markets analyst at Capital.com. "The outlook for U.S. growth continues to weaken, putting more focus on the consumer price index (CPI) report later today, which could trigger significant market moves," he added.

The U.S. dollar index, which measures the greenback against a basket of six major currencies, remained flat at 103.47 in early Asian trade, after falling 0.46% on Tuesday to its lowest level since mid-October.

The latest U.S. economic data has shown signs of deterioration, including a drop in small-business confidence for the third consecutive month in February. Investors have grown anxious after Trump failed to dismiss the possibility of a recession linked to his trade policies during a recent Fox News interview.

Julien Lafargue, chief market strategist at Barclays Private Bank, suggested that the CPI report could set the market up for a "lose-lose situation." "A higher-than-expected reading could fuel stagflation concerns, while a weaker-than-expected result could deepen recession fears. What the market really needs now is clearer visibility on growth," Lafargue said.

The euro dipped 0.05% to $1.0913 but remained close to Tuesday's peak of $1.0947, the highest since October 11. The single currency had been supported by expectations of large fiscal spending in Germany, although recent opposition from the Greens added complexity to the situation.

Sterling dropped 0.11% to $1.2933, following a 0.53% rise the day before. 

The dollar rose 0.17% to 148.01 yen after hitting a five-month low of 146.545 yen in the previous session.

The greenback was stable at C$1.44325, after fluctuating between a 0.5% gain and a 0.4% loss on Tuesday.

Cryptocurrency bitcoin held steady at $82,821, after recovering from a four-month low of $76,666.98 on Tuesday.

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