Dollar steadies post-selloff as tariff uncertainty limits upside
Press Hub UCapital
Share:
The US dollar found brief support on Tuesday following a week of heavy selling, with the DXY index holding near 99.64, just above last week's three-year low. While the greenback staged a modest rebound against some peers — notably the Swiss franc (USDCHF +0.02%) — its recovery remains fragile amid heightened geopolitical uncertainty and tariff volatility stemming from US trade policy.
Against the euro (EURUSD +0.22%), the dollar hovered at 1.1336, just shy of the three-year high at 1.1474, reflecting continued pressure as investors rotate into perceived safe havens and alternative reserve currencies. Meanwhile, the dollar traded at 142.99 yen, still near a six-month low, while remaining over 8% down month-to-date against the franc, in what would be its steepest monthly drop versus CHF since December 2008.
The reprieve followed relative calm in the Treasury market, where the benchmark 10-year yield (US10Y) edged up to 4.38%, after tumbling nearly 13 bps in the previous session. Yields remain elevated after last week’s 50 basis point surge, the largest weekly gain in over two decades, driven by a reassessment of the safety and attractiveness of US assets amid tariff turmoil.
President Trump’s erratic tariff stance — initially imposing and then pausing levies on goods such as smartphones and electronics — has injected considerable uncertainty into global markets. Analysts, including Commerzbank's Antje Praefcke, argue that every policy reversal further erodes global trust in US policy consistency, undermining the dollar’s longer-term appeal.
Adding to the dollar’s pressure are dovish signals from Federal Reserve officials. Fed Governor Christopher Waller indicated on Monday that Trump’s trade agenda constitutes a significant downside risk, possibly warranting preemptive rate cuts even in a high-inflation environment. Markets are now pricing in 86 basis points of Fed rate cuts by year-end, according to LSEG data.
Risk-sensitive currencies extended their gains on this backdrop. The British pound (GBPUSD) rose to 1.3470, the Australian dollar (AUDUSD) advanced 0.7% to 0.6371, and the New Zealand dollar (NZDUSD) gained 0.71% to 0.592, approaching a 4.5-month high. These flows highlight a persistent reallocation into higher-beta FX pairs amid shifting investor sentiment.
In summary, while the dollar has temporarily stabilized, its medium-term trajectory remains clouded by policy inconsistency, rate cut expectations, and declining safe-haven status of US assets. Without greater clarity on trade direction and fiscal coordination, further weakness in the dollar cannot be ruled out — particularly if foreign demand for Treasuries continues to wane.
Against the euro (EURUSD +0.22%), the dollar hovered at 1.1336, just shy of the three-year high at 1.1474, reflecting continued pressure as investors rotate into perceived safe havens and alternative reserve currencies. Meanwhile, the dollar traded at 142.99 yen, still near a six-month low, while remaining over 8% down month-to-date against the franc, in what would be its steepest monthly drop versus CHF since December 2008.
The reprieve followed relative calm in the Treasury market, where the benchmark 10-year yield (US10Y) edged up to 4.38%, after tumbling nearly 13 bps in the previous session. Yields remain elevated after last week’s 50 basis point surge, the largest weekly gain in over two decades, driven by a reassessment of the safety and attractiveness of US assets amid tariff turmoil.
President Trump’s erratic tariff stance — initially imposing and then pausing levies on goods such as smartphones and electronics — has injected considerable uncertainty into global markets. Analysts, including Commerzbank's Antje Praefcke, argue that every policy reversal further erodes global trust in US policy consistency, undermining the dollar’s longer-term appeal.
Adding to the dollar’s pressure are dovish signals from Federal Reserve officials. Fed Governor Christopher Waller indicated on Monday that Trump’s trade agenda constitutes a significant downside risk, possibly warranting preemptive rate cuts even in a high-inflation environment. Markets are now pricing in 86 basis points of Fed rate cuts by year-end, according to LSEG data.
Risk-sensitive currencies extended their gains on this backdrop. The British pound (GBPUSD) rose to 1.3470, the Australian dollar (AUDUSD) advanced 0.7% to 0.6371, and the New Zealand dollar (NZDUSD) gained 0.71% to 0.592, approaching a 4.5-month high. These flows highlight a persistent reallocation into higher-beta FX pairs amid shifting investor sentiment.
In summary, while the dollar has temporarily stabilized, its medium-term trajectory remains clouded by policy inconsistency, rate cut expectations, and declining safe-haven status of US assets. Without greater clarity on trade direction and fiscal coordination, further weakness in the dollar cannot be ruled out — particularly if foreign demand for Treasuries continues to wane.