On Wednesday, the US Dollar Index slightly increased by 0.01%, closing at 108.14, after briefly touching 107.75 during the session, its lowest point since January 6. The market is closely watching President Trump's tariff plans and the monetary policy moves of major central banks, resulting in a cautious mood among investors.
On Monday, Trump signed a comprehensive trade memorandum, instructing federal agencies to complete a series of trade reviews by April 1. The market generally sees this as a key moment for the announcement of tariff plans. Trump also threatened to impose tariffs on European imports but did not provide specific details. He further stated that if Russia does not end the war in Ukraine, he will impose more sanctions on Russia and may extend new tariffs to other related countries. As a result of this news, the ruble rose 0.25% against the dollar, closing at 99.246 in New York trading.
Brad Bechtel, Global Head of FX at Jefferies, noted that the dollar's movement is more influenced by Federal Reserve expectations and interest rate differentials, although tariff premiums are reflected in the market, their impact is limited. Current market volatility is increasingly due to profit-taking and adjustments in policy expectations.
The euro fell 0.08% against the dollar, to 1.0421. Several European Central Bank policymakers support further rate cuts, with the market expecting a 96% probability of a 25-basis-point cut at next week's policy meeting. Analysts believe that even if the Federal Reserve maintains a cautious stance, the euro may weaken further.
The yen rose 0.66% against the dollar, to 156.50 yen. The market expects an 88.3% chance of a 25-basis-point rate hike by the Bank of Japan at Friday's meeting. Meanwhile, the pound fell 0.22% against the dollar, to 1.2327, as data from the UK National Statistics Office showed a higher-than-expected budget deficit in December, putting more pressure on the Chancellor.
The Canadian dollar fell to 1.44 against the dollar, recording a 0.33% decline. Previously, December's inflation data in Canada indicated a cooling economy, putting pressure on the Canadian dollar. On Tuesday, the Canadian dollar hit a five-year low of 1.4515. Analysts at Deutsche Bank stated that the Canadian dollar against the dollar is "one of the undervalued currency cross pairs" in the foreign exchange market. Meanwhile, the Mexican peso rose 0.83% against the dollar, closing at 20.466.
The divergent trends in global currency markets highlight the complex reactions of investors to policy expectations and geopolitical risks.
