FX Traders Sell US Dollar Position Ahead of Reciprocal Tariffs
With FX traders exiting position, the US Dollar fell against trading partners on Monday as reciprocal tariffs is expected to affect all countries starting from April 2 as American President Donald Trump revealed on Sunday.
During early trading hours, forex trader exited positions in US dollar amidst negative impacts of trade war on U.S economy. Analysts said Trump has taken protectionism into another dimension, with market expectation that global inflation would be heated up.
Market analysts are anticipating lower demand for US dollar in the short to medium term before stability as US president failed to back down on protectionist policies with negative effects on globalisation of trade and commerce.
Key global ratings agency have also started to cutting 2025 growth forecast due to tariffs combats among top economies. FX options demand has increased as U.S targets trading partners with its new reciprocal tariff rates.
The EURUSD pair was trading to the upside early Monday as forex speculators were betting against the dollar ahead of a key date. Latest, data showed euro stabilized around the $1.08 level as investors assessed key inflation data while bracing for reciprocal U.S. tariffs set to take effect on April 2.
Meanwhile, the euro is on track for a 3.1% monthly gain, supported by broad dollar weakness amid shifting U.S. tariff policies under Trump and Germany’s approval of a major fiscal package. The yen strengthens markedly against other G-10 and Asian currencies as risk appetite worsens before looming U.S. tariffs.
Compressed ranges of G-10 currency pairs last week probably “give way to much bigger moves in the week ahead given the scale of event risk,” such as so-called “Liberation Day” tariffs due this Wednesday, Westpac Strategy Group says in a note.
Katsunobu Kato, Japan Finance Minister said on Monday that he would communicate closely with U.S. Treasury Secretary Scott Bessent on foreign exchange, pointing out that close dialogue is important for market stability.
Trump said earlier this month that he told the leaders of Japan and China they could not continue to reduce the value of their currencies, as doing so would be unfair to the United States, though the yen has appreciated around 4% against the dollar so far this year.
On Sunday Trump said reciprocal tariffs taking effect on Wednesday would start by targeting all countries. Last week, he suggested these tariffs could be more targeted than previously anticipated.
Trump looks serious about making massive policy changes but the next important question is where his pain threshold is over the impact to markets and the economy, Deutsche Bank analysts say in a note. #FX Traders Sell US Dollar Position Ahead of Reciprocal Tariffs
