Dollar Rallies as Trump’s Trade Tactics Stir Market Confusion

Image Credit: Japan Times

The dollar saw a slight increase on Friday after experiencing minor losses the day before, as traders tried to assess the future of the U.S. economy amid President Donald Trump's unpredictable statements on trade deals and Federal Reserve policies.

The currency experienced significant fluctuations throughout the week. It dropped by 1% against major currencies on Monday after Trump hinted at firing Fed Chair Jerome Powell for not cutting interest rates fast enough. However, it rebounded by 1.5% the following day when Trump clarified that he had no intention of replacing Powell and suggested easing tensions in the U.S.-China trade dispute. Despite this, the dollar weakened later in the week due to the lack of concrete progress in trade talks with Beijing. Overall, the dollar index, which tracks the currency against six major counterparts, is poised for a modest 0.27% gain, breaking a four-week losing streak.

Investors remain uncertain about the current status of U.S.-China trade relations. While Beijing claimed on Thursday that no trade talks had taken place, Trump reiterated that negotiations were underway later that day.

Earlier on Friday, the dollar had risen by 0.3% to 143.08 yen and was up 4% at 0.8303 Swiss francs. The euro dropped by 0.3% to $1.1355, and the British pound fell by 0.2% to $1.3314.

Progress in trade discussions has been seen with U.S. allies South Korea and Japan. South Korea's delegation stated on Thursday that the two countries aim to finalize a trade package before the reciprocal tariffs pause ends in July. Meanwhile, Japan’s Finance Minister confirmed there were no discussions about currency targets, despite Trump's accusations earlier in the month that Japan was intentionally weakening its currency. Japan’s chief negotiator will meet with U.S. Treasury Secretary Scott Bessent for a second round of talks next week.

Mizuho analysts noted that if the perception of imminent tariff reductions grows, it could help improve overall trade sentiment, which might support the dollar and drive it back to 145 yen. However, they also warned that if talks with Japan fail, the prospects with China could become even more challenging.

In Japan, core consumer prices in Tokyo rose by 3.4% in April from a year earlier, marking the second consecutive month of acceleration.

The Bank of Japan is expected to maintain its current policy at its upcoming two-day meeting ending May 1.

Bitcoin also saw a slight uptick, trading at around $94,220, approaching its highest point since March 3 at $94,489.92.

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