On Thursday, most Asian currencies and the US dollar weakened significantly following Trump's announcement of comprehensive trade tariffs. Trump's tariff policy dampened market risk sentiment, fueling fears of a potential economic recession among investors. The Japanese yen was an exception, as it rose strongly due to increased safe-haven demand, with the USD/JPY exchange rate falling to a three-week low, decreasing by 1.2%.
Among all Asian currencies, the Chinese yuan performed the worst. The yuan took a severe hit with the implementation of Trump's latest round of tariffs. The USD/CNY exchange rate rose by 0.4%, crossing the 7.3 mark at one point. Trump's latest tariffs have brought the total tariff on Chinese imports to the US to 54%, nearing the 60% tariff promise Trump had previously mentioned, which is viewed as the worst-case scenario. China, as the hardest-hit country, faces more challenges in its economy, even though it has started to recover after three years of downturn, now facing new economic pressures.
In the US, recession fears intensified the dollar's weakness. Although Trump's protectionist policies might support the dollar in the long term, expectations of a US recession and potential monetary easing have put the dollar under downward pressure. Analysts from Wells Fargo anticipate that the Federal Reserve may undertake a significant degree of monetary easing between mid-2025 and 2026, although hiking rates might be delayed.
Trump's tariff measures have impacted global trade, causing the depreciation of many Asian currencies. The Korean won and Indian rupee rose 0.3% and 0.1% respectively against the dollar, while the Australian dollar fell by 0.4%, although the decline was limited as only a 10% tariff was levied on Australia. Data showed that Australia's trade balance in February fell to its lowest point in nearly five years, closely related to the fluctuations in global trade and Trump's tariff policy.
On the other hand, the Singapore dollar was supported by safe-haven demand, with the USD/SGD exchange rate falling by 0.3%. Overall, the market's reaction to Trump's tariff policy led to significant volatility in the global currency markets, further heightening investors' risk-averse sentiment.
