The dollar hit a three-week high against the yen on Tuesday and strengthened across the board after some strong U.S. services data and cautious optimism on the tariff front.
President Donald Trump said not all of the levies he threatened would be imposed on April 2 and that some countries might get relief, helping the dollar and the mood on Wall Street overnight by easing some concerns about a possible slowdown in U.S. growth.
The dollar was last up at 150.56, after rising above 150 yen overnight ?t;JPY=EBS⪐. It rose to a three-week high of 150.92 yen in early Asian trading.
The lack of momentum in trade, however, underscored market uncertainty about tariffs and pushed the dollar higher. "Until there is evidence of who is going to get away with it and to what extent in terms of reciprocal tariffs, I don't think the market is too eager to act rashly," said Vishnu Varathan, chief economist and strategist at Mizuho Bank.
"The nature of Trump's tariffs is quite volatile. And arguably, the yen's sensitivity to tariffs is potentially high, so a defensive stance against a backdrop of higher yields and an aggressive BOJ seems like a reasonable position to take."
A strong services component in the S&P Global preliminary US PMI boosted US yields and coincided with weakness in Japan, where services and manufacturing both contracted.
The yen had been sluggish for weeks even as tariff and growth concerns weighed on the dollar, until last week's Federal Reserve meeting turned the tide after the central bank indicated it was in no hurry to cut interest rates.
Investors have been expecting the Bank of Japan to take a slow pace in tightening, which could strengthen the yen. Minutes of the BOJ's January meeting released on Tuesday showed policymakers discussing the pace of interest rate hikes.
Last week, the BOJ kept rates steady and warned of rising global economic uncertainty. However, many analysts still expect the BOJ's next move to come in the third quarter, most likely in July. The dollar also hit its strongest level since March 6 at $1.0781 per euro, as a strong rally in the common currency began to unwind.
The dollar last traded at $1.0804, while the pound hit a two-week low of $1.2883 before settling at $1.2935 in Asian trade. The U.S. dollar index posted a fourth straight session of gains to reach 104.3.
However, with Trump promising that auto tariffs would be imposed soon and the market implications of the levies complicated by concerns about U.S. growth, the next move is unclear.
Data from the Commodity Futures Trading Commission on Friday showed that speculators turned bearish on the U.S. currency last week for the first time since October, though their position was close to neutral.
"Nobody seems to know what to do with the dollar," said Brent Donnelly, president of analytics firm Spectra Markets.
"The EUR/USD trade has cooled, as have the big moves in interest rate differentials and relative equity performance," he said.
"The view that tariffs are clearly in the US dollar's favour has been challenged by the price action in 2025, and even when we get some information about what tariffs are going to look like next week, it's going to be hard to know what we should do."
The Australian dollar appeared to be supported by optimism about Trump's tariff flexibility, and was steady at $0.6287. The Australian government is due to announce a pre-election budget at 0830 GMT, aimed at easing the cost of living. Bitcoin hit a two-week high of $88.771 overnight but was down 1.5% at $86.497 in Asia. The New Zealand dollar was near a one-week low of $0.5725. (Newsmaker23)
Source: Reuters
