Yen jumps, dollar index edges higher before Trump’s reciprocal tariffs
The Japanese yen rose sharply and the US dollar index hit a record high on Tuesday, as investors sought safe havens ahead of US President Donald Trump's expected announcement of reciprocal tariffs on Wednesday.
The yen, considered a safe haven in times of uncertainty, gained against the US dollar. USD/JPY fell 0.52% to 149.15. The euro also fell 0.8% to 160.85 yen. The US dollar index, which measures the greenback against six major currencies, rose 0.1% to 104.30.
Markets are closely watching key US economic data, including the Job Openings and Labor Turnover Survey (JOLTS) and the ISM manufacturing index, due later in the session. The data could provide further insight into the impact of U.S. trade policy on the economy.
President Trump announced late Sunday that all countries would face new tariffs this week, though he did not provide specifics. He had previously mentioned a 25% tariff on European goods. White House aides are drafting a proposal to impose tariffs of around 20% on most imports to the U.S.
European Commission President Ursula von der Leyen said the EU is ready to negotiate with the U.S. on trade, but will respond strongly if necessary.
The euro fell 0.3% to $1.0788, after rising 4.5% in the first quarter of the year, marking its strongest quarterly performance since the fourth quarter of 2022, largely thanks to Germany's commitment to increased fiscal spending.
Geopolitical tensions continued to rise as the Chinese military conducted drills in waters north, south and east of Taiwan on Tuesday.
Investors have recently increased bets on the possibility of a future interest rate cut by the European Central Bank (ECB), as concerns about tariffs and weak economic data have led to a decline in bond yields and the euro. Currency markets are now pricing in around an 80% chance of the ECB easing policy this month, although central bank officials have been mixed on the issue.
The Australian dollar was flat at $0.6244 after the Reserve Bank of Australia left interest rates unchanged as expected. It had earlier hit its lowest since March 4 at $0.6217.