Dollar logs biggest weekly gain in four months amid Trump’s tariff escalation
&imwidth=600&imheight=450&format=webp&quality=medium "Dollar logs biggest weekly gain in four months amid Trump’s tariff escalation")
US One dollar banknotes are seen in front of displayed stock graph in this illustration. Photograph: (Reuters)
Market strategists pointed out that investors, previously bearish on the dollar due to rising US deficits and fiscal risks, are now re-evaluating positions amid fears that Trump’s tariffs could stoke inflation and force a policy response from the Federal Reserve.
The US dollar posted its strongest weekly performance since late February, buoyed by escalating trade tensions following President Donald Trump’s announcement of sweeping new tariffs. The greenback was up 0.8 per cent for the week, with the Bloomberg Dollar Spot Index rising 0.73 per cent, its best showing in more than four months. Trump’s fresh trade salvo includes a 35 per cent tariff on Canadian imports and blanket levies of 15-20 per cent on goods from most US trading partners. The aggressive measures surprised investors and fuelled concerns that the global trade landscape could deteriorate further, pushing inflation higher and weighing on global risk assets.
The Canadian dollar fell 0.26 per cent against the US currency to C$1.3688, after tumbling more than 0.5 per cent in the immediate aftermath of Trump’s announcement. The euro dropped 0.1 per cent to $1.1692 and was on track for a 0.9 per cent weekly decline, while the Japanese yen fell 0.49 per cent to 146.94 per dollar, heading for a 1.6 per cent weekly slide after Tokyo was hit with 25 per cent tariffs.
Traders eye inflation and Fed policy shifts
Market strategists pointed out that investors, previously bearish on the dollar due to rising US deficits and fiscal risks, are now re-evaluating positions amid fears that Trump’s tariffs could stoke inflation and force a policy response from the Federal Reserve. While some JPMorgan strategists acknowledged that bearish sentiment on the dollar has eased slightly, they maintained a longer-term view that the greenback will weaken due to tariff-related uncertainty. Speculative traders also modestly increased their bets against the dollar, holding $18.6 billion in short positions, the most since August 2023.
Risk assets hold steady, crypto surges
Despite the tensions, risk assets showed resilience. Bitcoin surged 3.7 per cent to a record $118,832, while Ethereum jumped 5.9 per cent to $2,987.15, supported by institutional inflows and optimism over upcoming pro-crypto legislation in the US Congress. As the August 1 tariff implementation deadline nears, global markets remain on edge. With diplomatic efforts underway, including from Brazil, which faces 50 per cent tariffs, traders are bracing for more volatility in currency and commodity markets alike.
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