US President Donald Trump’s tariffs were expected to boost the dollar, but instead, recession fears have dragged it down. The US dollar index fell 3% in 24 hours following Trump’s announcement, hitting a low of 101.27 on Thursday.
Investors had anticipated that tariffs would be bullish for the dollar and bad for other currencies. However, the US economy wasn’t strong enough to withstand maximum tariffs, says Chris Turner, global head of markets at ING. The US economy has been weakening, with growing signs of economic weakness.
Foreign currencies such as the Japanese yen and Swiss franc have seen gains, while more economically sensitive currencies like the Australian dollar have lost ground against the dollar. A flight to safety in other asset classes is also affecting currency markets, with a drop in US Treasury yields making dollars less attractive for foreign investors.
The euro has been an exception, rising against the greenback despite being viewed as less of a safe-haven play. Optimism around a potential peace deal in Ukraine and promises of more government spending from countries like Germany are contributing to its rise.
While the recent move in currency markets doesn’t pose an immediate threat to the economy or financial system, corporates may become more aggressive in hedging their currency risk in the months ahead. The foreign exchange market is liquid and deep, and should be able to withstand moves in the dollar without major issues.
Source: https://www.cnbc.com/2025/04/06/trumps-tariffs-were-expected-to-boost-the-dollar-but-theyre-not.html