U.S. Dollar Slips Amid Tariff Tensions and Anticipated BOJ Moves

In New York, investors reassessed the impact of the latest tariff proposals from President Trump, leading to a decline in the U.S. dollar against other leading currencies. Despite U.S. economic data, including stable jobless claims and a slowdown in factory output growth in the mid-Atlantic region, showing little deviation from expectations, the currency market remained sensitive to the ongoing uncertainty over tariffs. These measures, which will incorporate additional goods like lumber and forest products to a list that already includes imports such as cars, semiconductors, and pharmaceuticals, have evoked a response reminiscent of earlier periods of market volatility.

Meanwhile, the Japanese yen appreciated significantly, reaching an 11-week peak against the dollar amid growing speculation that the Bank of Japan might implement further rate hikes this year. Market analysts noted that safe-haven buying bolstered the yen, with some experts suggesting that the currency may ultimately trade at levels much lower than current rates. This development has coincided with modest movements in other currencies—the euro and the Swiss franc experienced gains against the U.S. greenback, evidencing a broader shift as investors factor in both domestic and international monetary policies.

Additional pressure on the dollar came from reports of a sharp decline in the Philadelphia Fed’s manufacturing index, which is seen as indicative of a slowing U.S. economic momentum. Analysts pointed out that while the Federal Reserve’s cautious approach to monetary policy is already priced into the market, these economic signals are unlikely to provide a supportive backdrop for the dollar in the near term.

Amid these currency moves, geopolitical tensions also played a role, with pointed exchanges between President Trump and Ukrainian President Volodymyr Zelenskiy capturing market attention. Despite the heated rhetoric, Zelenskiy adopted a cooperative tone by emphasizing Ukraine’s readiness to engage in meaningful agreements on security and investments with the United States. Additionally, hints at a possible new trade deal between the U.S. and China spurred optimism in currencies from countries heavily exposed to Chinese trade, such as the Australian and New Zealand dollars, which saw notable gains during the trading session.