Yen Firms as Trump's Tariff Agenda Raises Economic Outlook Uncertainty
The yen strengthened, while the U.S. dollar remained steady on Thursday as investors assessed the implications of President Donald Trump's latest tariff proposals on the global economy and central bank interest rate policies.
Geopolitical concerns also surfaced after Trump referred to Ukrainian President Volodymyr Zelenskiy as a "dictator" amid ongoing negotiations to resolve the Russia-Ukraine conflict.
Yen Gains Amid Safe-Haven Demand
The yen appreciated to a two-month high of 150.62 against the U.S. dollar, boosted by safe-haven demand concerns over the potential impact of Trump's tariffs and expectations of additional interest rate hikes by the Bank of Japan this year.
Pound and Euro Fluctuate
Sterling retreated from a two-month peak and traded at $1.2594. The euro remained flat at $1.0422, following a decline in the previous session as European Central Bank policymakers expressed contrasting views on inflation risks and the bank's stance on economic growth.
Trump's Tariff Agenda and Market Volatility
Trump announced plans to impose tariffs on imports of timber, cars, semiconductors, and pharmaceuticals in the coming month. The announcement follows previous statements regarding auto tariffs of "25%" and similar duties on semiconductors and pharmaceuticals.
While Trump's directives have historically sparked volatility, investors have grown accustomed to his tactics, resulting in more subdued market reactions.
Dollar Holds Steady, FOMC Minutes Reinforce Patient Approach
Against a basket of currencies, the U.S. dollar traded near a one-week high of 107.15. The recent minutes from the Federal Open Market Committee's meeting revealed that Trump's initial proposals raised concerns among Federal Reserve officials about potential inflation pressures and supported their cautious approach to interest rate cuts.
Australian Dollar Mixed on Jobs Report
The Australian dollar gained marginally to $0.6350 following a mixed jobs report that showed stronger-than-forecast employment growth but also a slight increase in the unemployment rate.
New Zealand Dollar Flat, RBNZ Governor Comments
The New Zealand dollar remained unchanged at $0.5705. Reserve Bank of New Zealand Governor Adrian Orr stated that another 50 basis point interest rate cut, like the one implemented this week, would require a significant economic shock.
China Holds Rates Steady
China kept benchmark lending rates unchanged at a monthly fixing, as expected, indicating a gradual approach to monetary stimulus and a focus on financial and exchange rate stability.