Dollar Weakens Amid Trade Uncertainty
TOKYO (Reuters) – The dollar slipped on Thursday during a chaotic week marked by the discovery of a US-China tariff ceasefire. There are speculations suggesting that Washington might be aiming for a weaker dollar to boost profits in Korea.
Asian currencies have seen renewed volatility as investors digested the news of last week’s meetings between South Korean and US officials regarding the dollar-won exchange rate.
A Bloomberg report added fuel to the speculation, indicating that Washington could be promoting a weaker dollar as part of trade discussions with Asian nations.
Nevertheless, worries about the US administration’s stance on the dollar are likely to keep investors on edge, which may limit movements in Asian currencies in the short term.
The South Korean won gained 0.8%, reaching $1,396.22 after a 0.6% uptick in the previous session. The won was the poorest performer among emerging Asian currencies last year, plummeting 14% against the dollar; however, it has recouped nearly 6% this year.
This sudden rise in the won reminded me of an unexpected two-day boost in Taiwan’s currency earlier in May.
“The news regarding currency discussions between the US and South Korea, alongside indications that the Trump administration might accept a weaker dollar, has improved market sentiment,” said Kieran Williams, head of Asian FX at Intouch Capital Markets.
“The broader uncertainty regarding the domestic outlook and trade tensions could mitigate immediate concerns,” he added.
Despite some recent losses against the euro, pound, and yen—largely due to apprehensions over President Trump’s economic strategies—the dollar has dipped against most emerging market currencies.
The Mexican peso was last seen at 19.38 per dollar, close to its seven-month peak reached in the previous session.
The Japanese yen gained 0.3% to 146.32 per dollar, although it remained near this month’s low of 148.65 noted earlier this week.
The dollar index, which measures the US dollar’s performance against six other major currencies, was 0.11% lower at 100.89, marking its decline for the fourth consecutive week.
On Thursday, investors are expected to focus on retail sales data while looking for insights into potential trade agreements following the easing of tensions between the US and China.
On Monday, the two nations revealed a 90-day suspension of most tariffs that had been imposed on each other’s goods since early April, which sparked a brief rally in the markets.
Christina Clifton, an economist at the Federal Bank of Australia, remarked:
“The USD index could increase by another 2%-3% in the upcoming weeks. We anticipate that the euro, pound, and yen will bear the brunt of the dollar’s recovery.”
The US Treasury yields have climbed, with the benchmark 10-year yield reaching the highest levels this month in light of concerns surrounding Trump’s budget package, which could add trillions to US debt.
Meanwhile, the Australian dollar has soared after positive data regarding the swift reductions in interest rates expected in the coming months, though a rate cut is widely anticipated next week.
Australia’s currency rose 0.22% to $0.64425, and the New Zealand dollar increased by 0.17% to $0.5908.
