The dollar fell to a one-month low Friday after President Trump signaled a softer stance on tariffs against China, sparking a rally in rival currencies like the euro and yuan. Markets reacted swiftly to his remarks, which fueled uncertainty around U.S. trade policies.
The dollar's decline on Friday put it on course for its worst week in almost a year, as concerns about the US trade policy were heightened by President Trump's comments about a possible easing of tariffs against China.
While the Bank of Japan raised interest rates and revised up its inflation predictions on Friday, providing no indications about when or how fast rates may be hiked in the future, the yen erased initial gains versus the dollar.
After Trump's inauguration, investors dumped the dollar since, unlike his campaign promises, his much anticipated tariff pronouncements took some time to materialize.
Trump expressed optimism that he and the world's number two economy might negotiate a trade deal in an interview that aired Thursday night on Fox News (via SCMP), saying that he would prefer not to impose tariffs on China.
Francesco Pesole, currency analyst at ING, said, "This seems to feed into the growing sense that Trump is underdelivering on protectionism compared to pre-inauguration remarks, and that ultimately some of those tariff threats may not materialise as long as some concessions are made on trade."
In response to Trump's comments, the value of the Chinese yuan climbed to 7.2370 per dollar, its highest level in eight weeks.
Additionally, Thursday, the president of the United States stated his desire for the Federal Reserve to lower interest rates.
There is widespread speculation that the Federal Reserve will keep interest rates steady during the first policy meeting under Trump's administration, and his comments come days before the meeting.
With a loss of about 1.6% expected for the week, the dollar index-which tracks the value of the dollar relative to a basket of currencies-was poised for its largest weekly decline since November 2023.
On Friday, the index fell to 107.27, its one-month low, and was last trading at 107.6, down 0.5%.
At $1.0515, the euro hit its highest level since December 17th, leading to a 0.65% increase. The euro was expected to rise by around 2% over the course of the week.
On Friday, statistics showed that businesses in the Eurozone started the new year with a small uptick in growth, thanks to solid services activity in January and a slowing of the long-term slump in manufacturing.
Sterling ended three weeks of declines with a 0.5% gain to $1.2417, and it was also on track for a 2% weekly increase.
