The Dollar's Gains against Yen Were Reduced, Influenced By the Impending US Tariff Deadline
- rabeelrana
The U.S. dollar saw some of its recent gains pared back on Friday. This happened after President Donald Trump’s tax cut bill officially passed and as pressure intensified for other countries to finalize trade deals with the U.S. While the dollar had rallied on Thursday due to stronger-than-expected U.S. jobs data, which reduced expectations for immediate Federal Reserve rate cuts, the dollar index is still set for its second straight week of declines.
The Republican-controlled House of Representatives approved Trump’s substantial spending and tax cut bill, estimated to add $3.4 trillion to the national debt. With the U.S. observing Independence Day, attention shifts to Trump’s July 9 deadline, when significant tariffs are set to hit countries like Japan that haven’t secured new trade agreements. The dollar index experienced its weakest first half of a year since 1973, largely due to concerns sparked by Trump’s tariffs about the U.S. economy and the safety of Treasury investments. Earlier in the week, the dollar even fell to its lowest point in over three years against both the euro and the British pound.
On Friday, the dollar index slightly dipped by 0.1% to 96.93, lessening its 0.4% gain from Thursday. The euro gained 0.2% to $1.1775, putting it on track for a 0.5% weekly increase, while the Japanese yen strengthened by 0.4% to 144.40 against the dollar. Trump indicated that countries would receive letters on Friday detailing their specific tariff rates, a change from his earlier approach of negotiating individual deals. European Commission President Ursula von der Leyen stated that the EU aims for an “agreement in principle” with the U.S. on trade before the deadline. Japan, a recent target of Trump’s criticism, is reportedly sending its chief trade negotiator back to the U.S. as early as this weekend.
In economic news, the U.S. Labor Department’s report on Thursday showed that nonfarm payrolls increased by 147,000 jobs in June, significantly surpassing economists’ forecasts of 110,000. Following this strong jobs data; market expectations for the Fed to keep interest rates unchanged at its July meeting have jumped to a 94.8% probability, up from 76.2% just a few days prior. The British sterling also saw a slight rise of 0.1% to $1.3668.
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Dollar Firms as Geopolitical Tensions Rise
- rabeelrana
The U.S. dollar edged higher on Monday as investors sought safety amid rising geopolitical tensions in the Middle East. However, the relatively restrained moves across currency markets suggest traders are in a holding pattern, awaiting Iran’s response to recent U.S. airstrikes on its nuclear facilities.
The most notable reaction was seen in the oil market, where crude prices surged to a five-month high following the strikes and comments from U.S. President Donald Trump, who hinted at the possibility of regime change in Iran. Meanwhile, global equity markets retreated as the conflict introduced renewed uncertainty for investors.
In foreign exchange markets, the euro slipped 0.33% to $1.1484, whiles the Australian dollar — often viewed as a proxy for global risk sentiment — dropped 0.67% to a one-month low of $0.6408. The dollar index, which measures the greenback against a basket of six major currencies, rose 0.12% to 99.037. Sterling also weakened, down 0.26% at $1.3416, while the New Zealand dollar fell 0.68% to $0.5926.
The U.S. dollar also gained against the Japanese yen, climbing 0.52% to 146.81 after touching a one-month high earlier in the session. The move put pressure on other Asian currencies, including the Indonesian rupiah, Malaysian ringgit, and Philippine peso.
Strategists at Bank of America noted that the USD/JPY pair could climb further if oil prices remain elevated, citing Japan’s heavy reliance on Middle Eastern energy imports, which account for over 90% of its petroleum needs. In contrast, the U.S. is largely energy self-sufficient. “USD/JPY offers a potential hedge against further geopolitical escalation, with the added benefit of positive carry,” the bank said.
Iran responded to the U.S. strikes by vowing to defend itself. The strikes, involving 30,000-pound bunker-buster bombs, targeted the mountainous region above the Fordow nuclear facility. In the U.S., the attacks sparked anti-war protests, even as government officials urged Iran to avoid further escalation.
In a potentially disruptive move, Iran’s parliament approved a proposal to close the Strait of Hormuz — a critical chokepoint for global oil flows, where nearly 25% of the world’s crude shipments pass through narrow waters shared with Oman and the UAE.
Despite the heightened tensions, markets appear to be treating the U.S. strikes as a contained event rather than the onset of a broader regional conflict. Although the dollar has regained some of its safe-haven appeal amid the geopolitical uncertainty, its modest gains reflect investor caution. Market participants appear hesitant to fully commit to the greenback until the situation becomes clearer.