Shaken dollar slides further amid tariff turmoil

On Monday, the U.S. dollar continued its slide after a brief bounce off a three-year low. Investors remain uneasy following a series of tariff announcements by President Donald Trump that last week rattled confidence in the world’s reserve currency.

Market participants are preparing for a volatile week as Trump’s quick move to impose tariffs—and then his sudden delay—continues to create uncertainty. During the Asian trading session, the dollar gave up its early gains, slipping against the Swiss franc toward a 10-year low reached last Friday. The dollar traded 0.05% lower against the Swiss franc at 0.8158.

Meanwhile, the British pound recovered a bit, losing only 0.06% to reach $1.3120, and the New Zealand dollar climbed to a four-month high of $0.5860.

On Sunday, Trump announced he would reveal the tariff rate on imported semiconductors within the coming week, promising some flexibility for companies in that sector. Previously, the White House had granted temporary relief from steep tariffs for smartphones, computers, and other electronics mainly from China—though Trump later said these exemptions would be short-lived.

Market analyst Tony Sycamore of IG commented, "The measures have been handled in a haphazard and heavy-handed way, creating a lot of uncertainty. Those storm clouds are still circling." Against the Japanese yen, the dollar fell 0.62% to 142.62, as Japan readies itself for trade talks with the U.S. that may include discussions on currency policy. Some Japanese officials expect Washington might ask Tokyo to support the yen. Japan’s Economy Minister Ryosei Akazawa confirmed that foreign exchange issues will be discussed between Finance Minister Katsunobu Kato and U.S. Treasury Secretary Scott Bessent. Currency strategist Christopher Wong of OCBC added, "Markets jumped the gun on pricing in further yen strength once it was confirmed that Bessent and Kato will talk FX."

The euro advanced 0.3% to $1.1396, hovering near Friday’s three-year peak as investors shifted to the common currency amid dwindling confidence in the dollar. Sycamore suggested, "We might see the euro reaching around $1.20 by the end of July or early August." Growing nervousness about holding U.S. assets has led some investors to look elsewhere, boosting the euro.

The Australian dollar also performed well, rising 0.11% to $0.6301, which extended its more than 4% gain from last week. Overall, the U.S. dollar, when measured against a basket of currencies, fell 0.45% to 99.45, remaining close to Friday’s three-year low.

George Saravelos, global head of FX research at Deutsche Bank, wrote in a client note, "The market is re-assessing the dollar’s appeal as a global reserve currency as the process of de-dollarization accelerates. This is most evident in the simultaneous collapse of the dollar and the U.S. bond market." A sharp sell-off in U.S. Treasuries last week—partially due to hedge funds quickly unwinding their basis trades—was a significant drag on the dollar. Bond prices showed little sign of recovery on Monday, with 10-year yields steady at 4.47% following the largest weekly rise in borrowing costs in decades.

Saravelos concluded, "We believe the process of de-dollarization has further to go, but we are keeping an open mind about how it unfolds and what the new global financial equilibrium will be."

The onshore Chinese yuan dipped 0.1% to 7.3022 per dollar, while the offshore yuan fell more than 0.3% to 7.3059 per dollar. The offshore yuan hit a record low last week, with the onshore unit dropping to its lowest level since 2007 amid intensifying tensions in the U.S.-China trade war.