NEW YORK: The US dollar weakened against the Japanese yen and the Swiss franc on Monday as markets grappled with trade tensions over tariffs and a probable US economic slow-down, while the euro pared gains from last week.
Markets have been fixated on trade tensions after US President Donald Trump slapped tariffs on top trading partners only to delay some of them for a month amid fears of a US slow-down.
The dollar weakened 0.76% to 146.91 against the Japanese yen after trading as low as 146.625 on the session, its lowest since early October last year. Against the Swiss franc , the dollar weakened 0.06% to 0.879 - hitting its lowest level since early December.
The euro was 0.03% higher against the dollar at $1.083350 but hovered near its four-month high as the markets awaited details on the likely boost to European spending. The single currency notched its best week in 16 years last week.
European Union finance ministers will meet on Monday to explore funding options for defence. European countries have rushed to boost spending and maintain support for Ukraine after Trump froze US military aid to Kyiv and raised doubts about Washington’s commitment to European allies.
“Much of the time everything is very US centric within FX: whether the dollar is overall stronger or weaker etc,” said Eugene Epstein, head of trading and structured products, North America, at Moneycorp in New Jersey.
“But right now, we have a lot of individual stories coming up like in Europe, the major move in the euro has been driven by potential increase in government spending and the likelihood that European Central Bank may be a little more hawkish than they were planning.”
Traders are pricing in 75 basis points of cuts from the Fed this year, LSEG data showed, with a rate cut fully priced in for June. Investors will be eyeing US inflation data due on Wednesday.
On currency futures markets, investors have slashed net long dollar positions to $15.3 billion from a nine-year high of $35.2 billion in January.
“Reading between the lines, it seems to me that the Trump administration clearly wants a weaker dollar regardless of what they formally say or not,” Epstein added.
Data on Monday showed regular pay in Japan rose 3.1% in January following December’s revised 2.6% increase and marking the biggest jump since 1992, though inflation at a two-year high meant real wages fell.
The Bank of Japan is widely expected to keep interest rates unchanged at its policy review on March 18-19, though officials have repeatedly cited the need to gauge the sustainability of wage growth after the central bank’s January rate hike.
The Norwegian crown gained against the dollar and the euro. It was at its strongest against the dollar since October at 10.7585 crowns to the US currency after surging inflation sowed doubts about the central bank’s plans to start cutting borrowing costs in March.
China’s yuan slipped on Monday after data over the weekend showed the consumer price index in February fell at the sharpest pace in 13 months.
The Canadian dollar weakened 0.33% versus the greenback to C$1.4415
per dollar. Former central banker Mark Carney claimed a landslide victory on Sunday to lead Canada’s Liberal Party and become its next prime minister, setting him up for a clash with the Trump administration over trade tariffs.
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