US Dollar Index trades firmly below 98.00 Trump’s fresh tariff threats spoils market mood
- The US Dollar Index trades higher to near the two-week high of 97.90 amid a sour market mood.
- US President Trump imposes 35% tariffs on Canada and is prepared to announce additional levies for the EU.
- Investors will pay close attention to the US CPI data for June.
The US Dollar (USD) holds onto gains during the European trading session on Friday as fresh tariff threats by United States (US) President Donald Trump have weakened the risk appetite of investors.
At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, clings to gains near the two-week high around 97.90.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.07% | 0.46% | 0.47% | 0.24% | -0.02% | 0.27% | -0.05% | |
| EUR | -0.07% | 0.39% | 0.40% | 0.16% | -0.02% | 0.19% | -0.13% | |
| GBP | -0.46% | -0.39% | 0.04% | -0.24% | -0.40% | -0.15% | -0.55% | |
| JPY | -0.47% | -0.40% | -0.04% | -0.23% | -0.50% | -0.23% | -0.55% | |
| CAD | -0.24% | -0.16% | 0.24% | 0.23% | -0.21% | 0.02% | -0.30% | |
| AUD | 0.02% | 0.02% | 0.40% | 0.50% | 0.21% | 0.35% | -0.11% | |
| NZD | -0.27% | -0.19% | 0.15% | 0.23% | -0.02% | -0.35% | -0.37% | |
| CHF | 0.05% | 0.13% | 0.55% | 0.55% | 0.30% | 0.11% | 0.37% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
On Thursday, US President Trump said in a telephonic interview with NBC News that he is considering imposing 15%-20% blanket tariffs that have failed to strike a deal during the 90-day pause period. The blanket tariff rate is higher than 10% announced on the so-called “Liberation Day” on April 2 and is expected to lead to upheavals in the global trade environment.
“We’re just going to say all of the remaining countries are going to pay, whether it’s 20% or 15%. We’ll work that out now,” Trump said.
In addition to an increase in the blanket levy, Trump’s threat to send letters to Canada and the European Union (EU) on Thursday or Friday, dictating tariff rates, also diminished the appeal of riskier assets. Later on, he imposed 35% tariffs on Canada, inclusive of fentanyl levy, and these were separate from Trump’s sectoral tariffs.
On the domestic front, the next major trigger for the US Dollar is the Consumer Price Index (CPI) data for June, which will be published on Tuesday. Investors will closely monitor the US inflation data as it will demonstrate the impact of sectoral tariffs. The inflation data will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook.
The Federal Open Market Committee (FOMC) minutes released on Wednesday showed that members believe monetary policy adjustments are inappropriate until they gain clarity over the impact of new economic policies on inflation.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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