The US dollar rallied on Thursday in response to a US court order suspending Donald Trump’s tariffs on other countries, which provided some support to the greenback.
A US federal court ordered a full suspension of most of Trump’s tariffs on global trade, representing a huge blow to Trump’s economic policies.
The dollar index rose 0.1% as of 12:01 GMT to 99.8, with a session-high at 100.5, and a low at 99.8.
Court: Trump Trespassed Constitutional Authority
The US Court of International Trade in Manhattan deemed US reciprocal tariffs on imports of other currencies as illegal.
The order, judged by a three-member panel, focuses on the exclusive rights of Congress to decide on tariff policies, and not the president.
Trump’s use of emergency economic powers to impose the aggressive tariffs was deemed illegal by the court.
It’s a massive blow to Trump’s ability to use tariffs to threaten world governments with tariffs to force them to acquiesce to hit demands.
The suspension includes tariffs on Canada, Mexico, and China, related to immigration and fentanyl, however, the ruling doesn’t touch tariffs on automotives, steel, and aluminum.
If the ruling comes through and survives appeal, all companies that paid tariffs in the past two months will be reimbursed in full, plus interest.
Investors Cheer the Ruling
The markets are cheering the ruling against the highly despised tariffs among corporate investors, with the ruling reinforcing the US justice system’s goal to restore balance to the three major powers in the US.
However, analysts caution that the ruling doesn’t automatically means that tariffs will be scrapped, with such a step likely leading to a surge in the dollar’s value.
US Assets Suffer Loss of Confidence
Investors have fled US assets, including the dollar, stocks and bonds in recent months following Trump’s tariffs, which damaged trust in the US financial and political systems.
However on Thursday, the dollar regained some losses and rallied 0.72% against the yen, reaching 145.86, with a 0.63% rally on the Swiss franc to 0.8326.
The euro fell 0.42% against the dollar to $1.1245, while sterling shed 0.3% to $1.3432, with the dollar index rising above 100 for the first time in a week.
The index remains down 8% this year with analysts still doubting the durability of dollar’s gains ahead of a long-winded court battle on tariffs.
Yen Speculation Might Bolster The Dollar
Analysts note that the dollar is gaining on the yen due to this news primarily, and not an inherent weakness in the yen.
But if the dollar surpassed 148, it might force speculators to close their yen positions rapidly, causing a sharp yen decline once more.
Investors are particularly focused on the bonds markets amid weak demand worldwide due to the focus on the considerable government deficits.
EU-tariff Pause Boosts Sentiment
Market sentiment was already boosted this week after Trump delayed his 50% tariff on EU goods until July.
