The dollar was steady on Tuesday but remained close to a three-year low against the euro and a six-month low versus the yen hit last week as investors struggled to make sense of a flurry of U.S. tariffs.
However, currency markets were much calmer in early Asian hours after last week's turmoil that hit the dollar hard despite a surge in Treasury yields, highlighting shaky investor confidence in the greenback and U.S. assets.
The dollar was up 0.27% at 143.53 yen but remained close to a six-month low of 142.05 hit on Friday. The euro was down 0.22% at $1.1324, just below a three-year high of $1.1474 hit last week.
After slumping to a 10-year low against the Swiss franc last week, the dollar was up 0.3% in Asian hours. The dollar has fallen nearly 8% against the Swiss franc this month, its biggest monthly decline since December 2008.
Market focus has been on a flurry of tariff headlines, with the U.S. removing smartphones and other electronics from its tariffs on Chinese goods over the weekend in a rare relief move, although comments from President Donald Trump suggested the reprieve was likely to be short-lived.
Trump's tariffs and then sudden suspension of imports to the U.S. have created confusion, adding to uncertainty for investors and policymakers around the world.
Kieran Williams, head of Asia FX at InTouch Capital Markets, said policy confusion and an erosion of investor confidence were fueling a slow but steady rotation out of dollar assets.
"The recent pullback in U.S. tariffs has eased some of the acute market anxiety, softening the dollar's appeal as a safe haven in the near term." The benchmark 10-year U.S. Treasury yield was steady at 4.354% after falling nearly 13 basis points in the previous session.
Yields rose about 50 basis points last week in their biggest weekly gain in more than two decades as analysts and investors questioned bonds' status as the world's safe-haven asset.
"Last week was all about deleveraging, liquidation and reallocation of assets away from U.S. assets. The tone this week is more muted in a holiday-shortened week," said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities.
"What helped set the tone was dovish comments from Fed officials that suggested they were looking beyond just inflation."
Fed Governor Christopher Waller said on Monday that the Trump administration's tariff policies were a major shock to the U.S. economy that could prompt the Federal Reserve to cut interest rates to stave off a recession even if inflation remains high. Traders are pricing in 86 basis points of rate cuts from the Fed for the rest of the year, according to LSEG data.
The dollar index, which measures the U.S. currency against six other currencies, was at 99.864, not far from a three-year low hit last week. The index has fallen more than 4% this month, posting its biggest monthly decline since November 2022. (Newsmaker23)
Source: Reuters
