NEW YORK :The dollar weakened on Friday on growth concerns ahead of a planned announcement next week by U.S. President Donald Trump on reciprocal tariffs, with the Japanese yen benefiting from safe haven flows as stocks tumbled and Treasury yields fell.
Traders have had bouts of optimism that the trade levies will not be as severe as feared, but concerns remain that they will dent economic growth and reignite inflation.
The lack of clarity over what tariffs exactly will be implemented has added to investor caution.
“The one word that I keep hearing over and over from clients, and on earnings calls and things, is uncertainty. And you hear this from the central bankers as well,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
“The one thing we do know is that on April 2, we’re going to get reciprocal tariffs. We don’t know exactly what that means,” Chandler said.
Trump on Wednesday announced a 25 per cent tariff on imported cars and light trucks starting on April 3.
“We see balanced risks going into next week’s deadline. We believe tariffs on selective products are already what markets expect. Across-the-board tariffs would be a negative surprise,” Bank of America FX analysts Athanasios Vamvakidis and Claudio Piron said in a report.
“However, we would not expect sustained USD strength in this case, as markets remain concerned about the US economy slowing. Implementation of new tariffs could also take time, because of difficult logistics, which would leave room for negotiations,” they said.
The U.S. currency also dipped on Friday after data showed that core inflation rose 0.4 per cent in February, more than expected, adding to fears of stagflation.
Headline inflation was as expected, with a 0.3 per cent rise. U.S. consumer spending also rebounded in the month. Separately, a survey from the University of Michigan showed consumers’ 12-month inflation expectations soared to the highest level in nearly 2-1/2 years in March.
The dollar was 0.69 per cent lower against the yen at 150.01 per dollar and was on pace to post its largest daily drop against the Japanese currency since March 3.
Data on Friday showed that core consumer inflation in Japan’s capital stayed above the central bank’s target and accelerated in March.
The euro was last up 0.2 per cent at $1.0823. The single currency is being supported by technical factors after nearing its 200-day moving average of $1.0727 and a key Fibonacci retracement level on Thursday.
Data earlier in Europe showed that inflation in March came in far below forecasts in France and Spain, while consumer expectations for price growth remained muted, bolstering bets for another European Central Bank rate cut.
French consumer spending also fell, while Germany’s unemployment rate rose more than expected and morale among Italian businesses and consumers slumped in March.
Sterling weakened 0.09 per cent to $1.2935.
British shoppers unexpectedly loosened their purse strings last month, official data showed on Friday, defying most forecasts from analysts who had predicted a fall in sales volumes against a backdrop of weak overall growth in the economy.
In cryptocurrencies, bitcoin fell 4.03 per cent to $83,783.
