The dollar has come under heavy pressure this month amid growing uncertainty over U.S. economic policy, including President Donald Trump’s recent tariff threats and concerns about the independence of the Federal Reserve. These concerns were compounded by political tensions in Washington, where disagreement between Republicans and Democrats over funding for the Department of Homeland Security has raised the risk of another government shutdown.
Trump’s escalating trade threats have further unsettled markets.
On Monday, Trump accused South Korea’s legislature of failing to uphold its trade commitments and threatened to raise tariffs on Korean imports—such as autos, lumber, and pharmaceuticals—to 25%. He also said he could impose a 100% tariff on Canadian goods if Canada finalizes a trade deal with China.
“Tariff Man” Keeps Markets on Edge
“The ‘tariff man’ shows no sign of repentance,” said Karl Schamotta, chief market strategist at Corpay in Toronto. He added that rising policy uncertainty is driving a renewed wave of “Sell America” sentiment, which has dominated markets for much of the past year.
As a result, investors remain hesitant to buy the dollar.
Against a basket of currencies, the dollar fell 0.48% to 96.64, staying near its September 2023 low. The currency earlier hit a high of 97.287 in volatile trading.
Fed Decision in Focus
Investors are now watching the Federal Reserve’s two-day meeting for guidance on future monetary policy. Most expect the Fed to hold interest rates steady, but some analysts warn of potential fallout if Trump disagrees with the decision.
“The big risk is not in the rate decision,” said Nick Rees, head of macro research at Monex. “We’re confident the Fed will hold rates unchanged. But Trump is not going to like that.”
Rees also suggested that Trump could announce his preferred candidate to succeed Fed Chair Jerome Powell shortly after the decision.
Yen Intervention Speculation Lifts Asian Currencies
The yen has rallied sharply in recent sessions amid talk of possible U.S.–Japan rate checks—often viewed as a prelude to official intervention. The yen strengthened to 152.96 per dollar, slipping below the 153 level.
Analysts note that possible U.S. involvement signals “multiple parties” may be ready to intervene, unlike previous episodes.
While no official confirmation has been made, a Reuters source reported that the New York Federal Reserve conducted dollar/yen rate checks with dealers on Friday. Japanese officials also said they have been closely coordinating with the U.S. on foreign exchange.
Other Major Currencies Gain
The euro rose 0.7% to $1.19635, hovering near levels last seen in June 2021. Sterling climbed 0.8% to $1.3786, its strongest since October 2021.
The Australian dollar also gained 0.8% to $0.69705, its highest level since February 2023.