After U.S. President Trump announced a 25% tariff on goods from Mexico, Canada, and China effective March 4th, the dollar briefly surged past the 107 mark, buoyed by a wave of short-term safe-haven demand. However, the overall trend of the dollar index was hampered by concerns about economic health, resulting in a monthly decline that marked its worst performance since last August. Weaker-than-expected economic data heightened expectations for a Federal Reserve rate cut, weighing down the dollar. Although Trump's tariff plan provided short-term support for the dollar, analysts believe that expectations of economic slowdown might put long-term pressure on it.
Analysts stated, "The downward pressure on the dollar primarily stems from weak economic growth expectations. While Trump's tariff plan offers short-term safe-haven support, it cannot fundamentally change the weakening trend of the dollar."
Meanwhile, the yen performed strongly at the end of February, posting a monthly gain of over 3.6%, its best performance since last July. Optimism about Japan's economic outlook has fueled market expectations that the Bank of Japan could raise interest rates. Despite core inflation in Tokyo slowing, indicating Japan still faces challenges, there is a general market belief that the Bank of Japan might adopt a more proactive monetary policy this year. A market strategist noted, "Japan's economic performance and inflation dynamics suggest the central bank might begin normalizing policy soon, but given the current uncertainty, it will remain cautious."
In contrast, the Australian dollar fell to its lowest point in over three weeks by the end of February, affected by a global economic slowdown, weak commodity prices, and rising safe-haven sentiment. Although it rose about 0.3% monthly, its overall performance remains under pressure, particularly in a context of waning global risk sentiment, and it may continue to face challenges in the short term. A foreign exchange analyst remarked, "The Australian dollar's exposure to risk makes it perform weaker when global economic uncertainty intensifies, and it may continue to be influenced by negative factors in the short term."
