Dollar sinks near multi-year lows as Trump’s tariff deadline looms

The US dollar hovered near multi-year lows on Monday, with traders growing increasingly cautious ahead of President Donald Trump’s looming tariff deadline. Markets are bracing for fresh trade tensions that could hit global growth and spark renewed volatility.

As reported by Reuters, the dollar is trading near its weakest levels since 2021 against the euro and at lows not seen since 2015 versus the Swiss franc. Investors have been cutting dollar positions as the White House’s aggressive tariff plans inject new uncertainty into international trade.

Trade threat weighs on the greenback

Trump’s so-called “Liberation Day” tariff plan is scheduled to move forward on Wednesday, ending a 90-day moratorium that was designed to give trading partners time to negotiate new deals. According to Reuters, only a handful of countries like Britain, China, and Vietnam, have so far struck any form of agreement with Washington.

Most other trade partners now face the risk of steep new levies beginning 1 August. As per Reuters, Trump said on Friday he would on Monday identify about a dozen countries that had received formal letters outlining their new tariff rates. That uncertainty has weighed on the dollar, with traders wary that higher tariffs could disrupt trade flows, undermine business confidence and dampen global demand.

Analysts see volatility ahead

Reuters quoted James Kniveton, senior corporate FX dealer at Convera, warning that “market volatility appears inevitable when the pause officially ends and new tariff levels are announced.”

Kniveton suggested that the market’s reaction might be more measured than in past tariff rounds, given that this escalation has been widely telegraphed. Still, he cautioned that any surprise moves from the White House could trigger sharp currency swings. According to Reuters, some analysts also see the possibility of a last-minute extension of the deadline if negotiations show progress. But for now, markets are clearly pricing in risk.

Dollar trading near key lows

As per Reuters data, the dollar slipped 0.1 per cent to 0.7939 Swiss franc in early Asian trade on Monday, edging back toward its 1 July low of 0.7869, its weakest level since January 2015. Against the yen, the dollar also fell 0.1 per cent to 144.49.

The euro eased slightly to $1.1780, not far from the 1 July peak of $1.1829, its highest since September 2021. Meanwhile, the dollar index, which measures the currency against six major peers including the euro, yen and franc, was flat at 96.967, still close to last week’s 3-1/2-year trough of 96.373.

Reuters noted that the greenback’s weakness reflects a combination of factors, including shifting rate expectations and safe-haven flows, but this week the spotlight is squarely on trade policy.

Countdown to tariff decision

Reuters reported that US Treasury Secretary Scott Bessent said on Sunday that several major trade announcements could arrive in the coming days, underscoring the high-stakes negotiations still underway. Trump has repeatedly warned that countries failing to strike deals would see tariff rates revert to levels first announced in April.

The White House’s strategy of threatening sharp tariff hikes while offering bespoke trade deals has forced even close allies to scramble for market access, while prompting companies to rethink supply chains and production plans. According to Reuters, traders expect continued uncertainty until there is clarity on whether the deadline will hold, be extended or trigger a new round of tariff escalation. With just days left before the pause ends, currency markets are poised for further swings as they track every development out of Washington.

(With inputs from the agencies)