The US dollar fell in European trade on Tuesday against a basket of major rivals, extending losses for the second day under pressure from US 10-year treasury yields.
The US implemented its new tariffs against Canada, Mexico, and China, with Beijing responding quickly with tariffs on US commodities as the trade wars erupt.
Now investors await a series of important US labor data this week, expected to provide crucial pricing for the odds of a Fed rate cut this quarter.
The Index
The dollar index fell 0.4% to 106.16, with a session-high at 106.65.
On Monday, the index lost 0.95%, the first loss in four days away from two-week highs at 107.66 on profit-taking.
US Yields
US 10-year treasury yields fell 1.1% today on track for the third loss in a row, plumbing a five-month trough at 4.115% and hurting the dollar’s standing.
The decline comess asd investors prepared for Trump’s 25% tariffs, which officially went into action today against Canada and Mexico.
Otherwise, according to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in March stood at 9%.
A smaller gap between US and Japanese long-term treasury yields would boost the standing of Japanese bonds and underpin the yen.
Trump’s Tariffs
Trump imposed 25% tariffs on Canada and Mexico, and a 10% additional tariff on Chinese products, damaging global sentiment.
China quickly responded by imposing 15% tariffs on some US imports, and will limit exports to 15 US companies.
