(Bloomberg) — The US dollar rallied on fresh uncertainty surrounding President Donald Trump’s plans to implement tariffs, capping a volatile week for currency markets buffeted by trade headlines in the early days of the new administration.
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The Bloomberg Dollar Spot Index rose as much as 0.4% on Friday and the greenback’s global peers slid after Trump signaled he would announce next week reciprocal levies on trading partners, without specifying which countries would be targeted. The greenback clawed back some losses on the week, seen after Canada and Mexico announced a one-month reprieve on levies.
“We are in a period where tariff rhetoric and tariff headlines are going to move markets,” said Brendan McKenna, a strategist at Wells Fargo in New York.
Nearly all Group-of-10 currencies weakened on Friday versus the dollar. The yen pared gains seen earlier in the session after Trump separately said that tariffs on Japan remain an option, while the euro led declines among the group.
Across emerging markets, eastern European currencies and the Brazilian real led losses. A gauge for emerging market stocks, heavily weighted toward Asia, pared its advance on the tariff news. The equity index is still headed for its fourth week of gains.
“Reciprocal is a word with meaning, but we know Trump plays it loose and breezy,” said Jordan Rochester, the head of FICC strategy at Mizuho. “Anyone who thought tariffs were not on the agenda until the Mexico and Canada grace period ends now has to buy some short term hedges.”
Currency traders on Monday faced the trade war’s new reality after the Trump administration said it would carry out 25% tariffs against goods from Canada and Mexico, only to sharply reverse the week’s opening moves after the North American neighbors subsequently announced a one-month delay. Ten percent levies against Chinese goods remain in place.
A Bloomberg gauge of the dollar now trades about 0.5% lower on the week amid the reprieve on Canada and Mexico — pulling back from its strongest mark since 2022.
While positioning in the derivatives markets remains heavily long dollar, speculative traders pared bullish dollar positions in the week ended Tuesday. They now hold some $31.2 billion in long wagers, according to the latest data from the Commodity Futures Trading Commission as of Feb. 4, down more than $2 billion from the week prior.