The U.S. dollar hovered near a five-month low against its major peers on Monday, weighed down by President Donald Trump’s erratic trade policies and a string of soft macroeconomic data.
Euro Nears Five-Month Peak
The euro remained close to a five-month peak after German political parties reached a fiscal deal on Friday, which could boost defense spending and help revive growth in Europe’s largest economy. The euro traded at $1.0881, just off its $1.0947 high from last Tuesday, which was the highest level since October 11.
German Chancellor-in-waiting Friedrich Merz announced on Friday that he had secured backing from the Greens for a massive increase in state borrowing. The deal, which is set to be approved by the outgoing parliament next week, includes a 500 billion euro ($544 billion) fund for infrastructure and sweeping changes to borrowing rules.
Shifts in Macroeconomic Markets
Goldman Sachs analysts, Dominic Wilson and Kamakshya Trivedi, noted “two stark shifts in macro markets” over the past month. The first shift was a sharp re-rating lower of U.S. assets due to tariff volatility and broader policy uncertainty under the Trump administration. The second shift was a re-rating higher in fiscal policies in Germany, particularly due to the recent fiscal deal.
Together, these shifts challenge the longstanding narrative of U.S. exceptionalism in the market, the analysts said.
Yen and Yuan Performance
The Japanese yen remained near a five-month top, supported by hawkish signals from the Bank of Japan (BOJ), although the central bank is expected to keep policy unchanged when it meets on Wednesday. The U.S. Federal Reserve is also expected to hold its policy steady during its meeting later this week.
The Chinese yuan firmed against the dollar, edging back toward the strongest level seen in four months in offshore trading. This came ahead of a highly anticipated press conference on Monday detailing steps to boost domestic consumption.
Dollar Index and Other Currencies
The dollar index, which tracks the U.S. dollar against six major currencies, was little changed at 103.71 early in the Asian session, less than 0.5% from a five-month low of 103.21 reached last Tuesday. The index has fallen almost 6% from the two-year peak of 110.17 in mid-January as initial optimism regarding Trump’s presidency turned to concerns about his trade policies triggering a potential recession.
Data released on Friday showed that U.S. consumer sentiment plummeted to a near 2.5-year low in March, with inflation expectations soaring due to concerns over Trump’s sweeping tariffs, which have triggered a global trade war.
The dollar was also little changed at 148.70 yen, hovering near last Tuesday’s 146.545 low, which marked its weakest level since October 4.
The BOJ is widely expected to keep interest rates steady on Wednesday, although there are increasing indications that conditions may be favorable for a rate hike. Major Japanese firms have offered significant wage increases in their ongoing wage talks with unions, which could support consumption.
The dollar weakened by 0.15% to 7.2266 yuan in offshore markets, edging closer to 7.2158, the weakest level since November 13.
China’s Special Action Plan
On Sunday, China’s State Council unveiled a “special action plan” to stimulate domestic consumption, which includes measures to increase residents’ income and establish a childcare subsidy scheme. This is seen as part of China’s broader efforts to support the economy amid growing domestic and global challenges.
Other Currency Movements
- The Australian dollar added 0.06% to $0.6328, often acting as a proxy for the yuan.
- Sterling slipped 0.08% to $1.2927.
- Bitcoin declined 0.5%, trading around $82,847.
The U.S. dollar’s struggles reflect broader global uncertainties, with market sentiment being shaped by trade tensions, economic policies, and shifting fiscal dynamics in key economies.
Related Topics:
Norway Boosts Financial Support to Ukraine with €4.3 Billion
Dollar Holds Steady, Euro Declines Amid Rising Global Trade Tensions
