The US dollar continues to decline as doubts about investor confidence in the global reserve currency persist, following a series of tariff-related remarks from President Donald Trump, according to Reuters.
Investors are preparing for another week of volatility as Trump’s announcement of tariffs on imported goods, followed by their abrupt postponement, has created significant confusion.
Currently, the US dollar is trading close to a three-year low at 99.77 against a basket of six currencies.
The White House has exempted smartphones, computers, and certain other electronic products primarily imported from China from the high tariffs.
Trump later indicated that this exemption would be temporary, stating that he would reveal the tariff rate on imported semiconductors next week and that some companies in the sector would receive flexibility.
“At this moment… the situation has been managed in a disorganized and heavy-handed manner, leading to considerable uncertainty. The clouds of uncertainty are still present and have not dissipated,” remarked Tony Sycamore, a market analyst at IG.
Euro Exchange Rate
The euro has stabilized at 1.1359, remaining close to Friday’s three-year peak, as investors turn to the single currency amid the dollar’s crisis of confidence.
“I believe we could see the euro reach $1.20 by the end of July or early August,” Sycamore from IG stated.
Increasing apprehension among investors regarding US assets has prompted some to divest and redirect their funds to other markets, including Europe, contributing to the euro’s appreciation.
Dedollarization
“The market is reevaluating the structural appeal of the dollar as the global reserve currency and is experiencing a swift process of de-dollarization,” wrote George Saravelos, head of currency research at Deutsche Bank, in a note to clients.
He noted that while the de-dollarization process is ongoing, it remains uncertain how it will unfold and what the eventual new equilibrium in the global financial system will look like.
The significant sell-off in the US Treasury bond market last week exerted considerable pressure on the dollar.
According to Deutsche Bank, this phenomenon is particularly evident in the concurrent decline of both the US currency and bond markets.
The dollar reached a decade-low against the Swiss franc, trading at 0.8188. Meanwhile, the pound sterling managed to maintain most of its 1.7% increase from the previous week, closing at $1.3099. Against the yen, the dollar experienced a decrease of 0.22%, settling at 143.24. The Australian dollar appreciated by 0.08% to 0.6299, continuing its upward trend of over 4% from last week.