U.S. Dollar Sinks Like Titanic Ship

The dollar fell following contradictory reports regarding the severity of President-elect Donald Trump’s proposed tariffs upon taking office.

Washington Post report revealed Trump’s aides were considering plans, to impose tariffs on all nations, but only on industries deemed essential to national or economic security, allaying fears of more severe and broader levies.  The dollar index fell as much as 100 basis points during Monday’s trading session.

Markets project Trump’s bark will be worse than his bite and any news that supports this idea will encourage riskier assets to rise and the dollar and Treasury yields to fall.

However, the reality is that there is still no clear endpoint for the downside risks. The euro was up by 65 basis points at $1.0379, while the dollar index, which compares the US dollar to a basket of currencies, dropped by 70 basis points to trade at 108.32 index points.

the dollar index hit a two-year high of 109.54 index points last week, supported by the strong economy, the possibility of higher inflation from tariffs, and the Federal Reserve’s slower rate cuts.

Fed Governor Lisa Cook remarks that the Fed can afford to be cautious with any further rate cuts given an economy that is on solid footing and inflation that has been stickier than expected also contributed to the dollar’s declines.

Some Fed policymakers are expected to restate recent remarks made by their peers about the need to fight inflation. The euro fell to its lowest point since November.

 

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Olumide Adesina
Olumide Adesina
Financial Market Writer
Olumide Adesina is a French-born Nigerian financial writer. He tracks, analyzes, and reports changes in financial markets with over 15 years of working experience in investment trading.
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