NEW YORK: The US Dollar (USD) fell on Friday and was on track for its worst week in more than a year on expectations that tariffs enacted by US President Donald Trump will be lower than previously feared and unlikely to spur an international trade war.
The prospect of high tariffs on goods from countries including China, Canada, Mexico and the euro zone have raised concerns about a renewed bout of inflation, which has helped to send Treasury yields and the U.S. dollar higher in recent months.
But that move partially reversed this week as traders bet that tariffs may not be as large or as widespread as previously feared. Trump said on Thursday that his conversation with Chinese President Xi Jinping last week was friendly and he thought he could reach a trade deal with China.
“People are less and less convinced that the tariffs are coming,” said Adam Button, chief currency analyst at ForexLive in Toronto.
The dollar index was last down 0.67% on the day at 107.42. It reached 110.17 on Jan. 13, the highest since November 2022. It is on track to lose 1.83% this week, the biggest weekly fall since November 2023.
The Chinese yuan also got a lift on the back of Trump’s remarks, with the onshore unit rising to its strongest level in eight weeks at 7.2363 per dollar.
Trump also said on Thursday that he wants the Federal Reserve to cut interest rates, before the U.S. central bank is due to meet next week.
The Fed is expected to keep rates unchanged when it concludes its two-day meeting on Wednesday, though investors will be watching for any clues that a rate cut could come in March if inflation continues to ease closer to the U.S. central bank’s 2% annual target.
