Dollar Dips Despite Trump’s Trade Moves
Dollar Takes a Tumble Despite Trump’s Trade Deals
The US dollar is on track for its biggest two-month drop in over two decades, despite some recent positive news from the Trump administration. On Tuesday, the dollar actually rose against the yen and euro, boosted by plans to ease auto tariffs and promises of more trade deals. But the overall trend is clearly downward.
Easing Tariffs and Trade Deals
The Trump administration announced plans to soften tariffs on foreign parts used in US-made cars and to avoid piling on extra duties for cars imported from abroad. President Trump is expected to sign an executive order on these changes soon.
Adding to the positive sentiment, US Treasury Secretary Scott Bessent said the administration is making good progress on trade deals with countries like India and South Korea. He plans to meet with at least 17 trade partners in the coming weeks.
Yen’s Strength and Global Slowdown
Despite the dollar’s recent gains, it’s still down over 5% against the yen this month. Analysts believe the yen could continue to strengthen as a global economic slowdown could lead major central banks, including the Federal Reserve, to cut interest rates. This would narrow the gap in interest rates between Japan and other countries, making the yen more attractive.
Euro’s Rise and ‘Mean Reversion’
The euro, on the other hand, is up a significant 5.4% against the dollar this month, its biggest monthly gain since November 2022. Analysts suggest that this is partly due to a phenomenon called ‘mean reversion’ – a tendency for markets to return to their average values. After a long period of weakness, the euro is now bouncing back.
A Mixed Picture for the Dollar
Overall, the dollar is facing a mixed picture. While trade deals and tariff relief could provide some support, the global economic outlook and potential for further interest rate cuts could continue to weigh on its value.
