After U.S. President Trump announced the implementation of tariffs on steel and aluminum products, the Bloomberg Dollar Index rose on Monday. However, as investors began to tire of the tariff news, the dollar's gains started to narrow, especially amid increasing uncertainty over Trump's tariff measures. The yen performed the worst among G-10 currencies, declining against the dollar.
The Dollar Index rose 0.3% at one point, reaching its highest level since February 4th. However, JPMorgan strategists Meera Chandan and Arindam Sandilya noted in a report that investors should not assume that the tariffs, once implemented, will be permanent, considering that the tariff measures might vacillate, as the dollar's strength driven by tariffs may not persist as it did in the first quarter.
Nevertheless, JPMorgan strategists remain bullish on the dollar in the short term, particularly while the impacts of tariffs on economic growth and inflation are still being discussed in the market. Wells Fargo's New York strategist Aroop Chatterjee also said the market is weighing the dual impact of tariffs on economic growth and inflation. If the negative impact on economic growth outweighs that on inflation, the dollar's rise may be concentrated in emerging market currencies and those of more open economies.
This week's market attention will focus on the release of U.S. CPI data and Federal Reserve Chairman Powell's testimony in Congress, which may provide more clues about the Fed's future policy path.
In terms of specific currency performance, USD/JPY rose 0.4% to 152.01. Helen Given of Monex noted that the yen surged 2.5% last week, leading to profit-taking in the market. USD/CAD rose 0.2% to 1.4314, peaking at a 0.6% increase during the session. Quebec Premier Francois Legault stated that Canada should expedite the renegotiation process of the North American trade agreement.
In Europe, EUR/USD fell 0.2% to 1.0305, dipping as low as 1.0280 during the session. ECB President Lagarde stated that progress has been made in combating inflation, but global trade frictions still pose risks. Additionally, GBP/USD dropped 0.3% to 1.2365.
Among the G-10 currencies, the Norwegian krone and the Swedish krona showed the strongest market resilience.
