(Bloomberg) — The dollar fell, extending recent losses, on concern over the impact of higher tariffs on the US economy and the risk of a widening fiscal deficit.
Bloomberg’s gauge of the greenback slipped for a third day, heading for its lowest close since July 2023, on weak demand for US assets. An index of Asian currencies climbed toward the highest level since October, with the Taiwan dollar advancing for a sixth day. Equity-index futures for the S&P 500 and Nasdaq 100 jumped 0.9%, holding their gains from a Monday holiday.
The yen rose as much as 0.5% after Bank of Japan Governor Kazuo Ueda indicated his intention to keep raising interest rates if the economy improves. Treasuries edged higher with the 10-year yield falling two basis points. Japan’s 40-year bonds rose ahead of a bond auction Wednesday. Asian shares swung between gains and losses.
President Donald Trump’s tariff threats and the risk of a widening US fiscal deficit are showing up most clearly in the dollar, diminishing the appeal of the currency. Hedge funds, asset managers and other speculative traders continued to bet against the currency with some of the angst coming from Trump’s proposed tax bill, which is expected to increase the federal deficit by hundreds of billions of dollars.
“Any further tariff news could inject more volatility into currency markets and pull the dollar down,” Kristina Clifton, a senior economist and currency strategist at Commonwealth Bank of Australia, wrote in a note.
The dollar gauge has fallen more than 7% this year and is set to wipe out all of its gains from 2024, when the index rose the most since 2015. Investor demand for dollars is fading amid jitters over tariffs and concern over the US government’s finances spurred by plans to extend tax cuts implemented by Trump in his first term.
“In a way, all roads have led to a weaker dollar,” Chris Weston, head of research at Pepperstone Group, wrote in a note. “Higher perceived US deficits have raised concerns about increased future Treasury issuance, pushing up term premium and seeing people migrate away from the dollar.”
Markets Live Strategist Garfield Reynolds says:
President Trump’s determination to disrupt the global financial order continues to sour sentiment toward the dollar. His policies are also helping to encourage moves that could substantially erode the greenback’s role as the world’s reserve currency, a theme that adds to the headwinds for US Treasuries and even stocks. Yes, the dollar’s dominance isn’t about to vanish, but the foundations for such a shift are being laid.
The People’s Bank of China set its daily reference rate for the yuan basically in line with the average forecast in a Bloomberg survey and with the spot rate, a sign Beijing is moderating its support for the currency amid dollar declines.
Tariff headlines are once again dominating the market after the European Union agreed to accelerate trade negotiations with the US, sending stocks higher Monday.
In Japan, yields on super-long bonds fell ahead of Wednesday’s auction that’s expected to test demand following a recent sale that sent jitters through global markets. Yields on 40-year and 30-year maturities slid 10 basis points in Tokyo, adding to declines in recent days. These moves followed sharp gains in yields to record highs last week.
China’s central bank asked its major lenders to raise the share of yuan when facilitating cross-border trade, in its latest push for the use of the currency as the world grapples with the onslaught of tariffs by the US.
Trump’s plan to bring more factories back to the US has President Xi Jinping’s government also considering options to boost production of high-end technological goods.
A key event this week will be Nvidia Corp.’s results on Wednesday. The chip-making giant is seen as a bellwether for so called growth stocks and the sustainability of the artificial intelligence boom. Its outlook will be crucial given macro risks and tariff uncertainty.
Investors are also gearing up for the Federal Reserve’s preferred inflation measure, the US personal consumption expenditures price index excluding food and energy, which will be released Friday. The April reading is forecast to rise 0.1% based on consensus expectations.
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.9% as of 12:42 p.m. Tokyo time
- Japan’s Topix was little changed
- Australia’s S&P/ASX 200 rose 0.3%
- Hong Kong’s Hang Seng fell 0.3%
- The Shanghai Composite fell 0.3%
- Euro Stoxx 50 futures fell 0.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1393
- The Japanese yen rose 0.3% to 142.40 per dollar
- The offshore yuan fell 0.1% to 7.1841 per dollar
Cryptocurrencies
- Bitcoin fell 0.6% to $108,915.39
- Ether fell 0.6% to $2,551.35
Bonds
- The yield on 10-year Treasuries declined three basis points to 4.48%
- Australia’s 10-year yield declined six basis points to 4.32%
Commodities
- West Texas Intermediate crude fell 0.4% to $61.28 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess and Catherine Bosley.
©2025 Bloomberg L.P.