Dollar tumbles by 2%, worst single-day drop in over two years

The US dollar index plunged approximately 2% to 101.8 on Thursday, logging its steepest single-day decline in over two years and reaching a six-month low, as traders reacted to President Trump’s sweeping new tariffs and growing economic uncertainty.

Dollar tumbles by 2%, worst single-day drop in over two years

On Wednesday, Trump announced a baseline 10% tariff on all imports, effective April 5, with steeper levies targeting key trade partners—54% for China, 20% for the EU, and 46% for Vietnam. In response, both China and the EU vowed retaliation, heightening fears of an extended trade war that could weaken US economic growth, disrupt supply chains, and fuel inflationary pressures. The escalating trade tensions prompted a swift shift in market expectations regarding Federal Reserve policy. Traders increasingly bet on deeper monetary easing, now pricing in three to four quarter-point rate cuts this year—up from three just a day earlier—with the first likely coming in June. Treasury yields tumbled across the curve, reflecting heightened recession risks and a flight to safe-haven assets like gold and the Japanese yen, which surged against the dollar.

Mixed picture of the US economy

Adding to the bearish sentiment, fresh labor market data painted a mixed picture of the US economy. The Challenger report revealed that job cuts surged to their highest level since 2020 in March, driven in part by widespread layoffs at the Department of Government Efficiency (DOGE). With concerns mounting over slowing job growth, market participants are now eagerly awaiting Friday’s closely watched nonfarm payrolls report for further clarity on the labor market’s health and its potential impact on Federal Reserve policy.