(Bloomberg) — The dollar pared losses after US President Donald Trump said reciprocal tariffs are coming today, curbing appetite for riskier assets and stoking concern inflation may quicken further.
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A trade-weighted index for the greenback traded 0.1% lower on the day, trimming a drop of 0.3% earlier. Following Trump’s post on Truth Social, the Swiss franc and the yen outperformed major peers as demand for havens increased.
Options sentiment for the greenback hit the least-positive level in over a month earlier as traders increased bets on a possible end to the war in Ukraine. The euro and eastern European currencies were among those leading the rally against the greenback early on as European stocks climbed.
Trump Promises Reciprocal Tariffs Today Without Giving Details
US President Donald Trump agreed in a phone call with his Russian counterpart Vladimir Putin to start negotiating an end to the war, a change from previous US policy. US Treasury Secretary Scott Bessent also presented an economic partnership agreement to Ukrainian President Volodymyr Zelenskiy during a visit to Kyiv.
“Hopes of a Russia-Ukraine truce are fueling the positive vibes post Trump’s chat with Putin,” said Rodrigo Catril, senior foreign-exchange strategist at National Australia Bank Ltd. in Sydney. “A Russia-Ukraine truce offers the potential for a topside break” for the euro, he said.
The euro climbed as much as 0.6% to $1.0440, before trading around $1.0400. It’s still heading for a third day of gains, its longest winning streak this year. In the options market, short term sentiment has turned from negative to neutral, with traders on Wednesday mostly going for bets on further gains.
The euro-dollar pair has been dragged down recently by the European Central Bank pushing ahead with interest-rate cuts as the Federal Reserve takes a pause.
While the difference between European and US rates in the short term may not work in the euro’s favor, there is more scope for long-end bond yields to converge, Morgan Stanley strategists including David Adams wrote in a note. Even a partial convergence in 10-year yields could help push the euro up to the US bank’s target of $1.08, they said.
The dollar move during the Asia session “was sparked by euro buying, and then stops triggered on other long US dollar positions — dollar-offshore yuan, for example, breaking below 7.30,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets in Singapore. “There’s also a risk-on element to the move.”
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