Dollar Declines Amid Trade Agreement Speculation

NEW YORK: The dollar’s value decreased on Wednesday as both safe haven and risk-sensitive currencies outperformed it. This occurred as traders awaited potential new trade agreements between the U.S. administration and its global partners.

Last week, the dollar experienced a decline due to concerns regarding the anticipated economic impact of recently imposed tariffs. Furthermore, investors adjusted their allocations to overseas markets due to uncertainty surrounding the inconsistent application of these trade measures.

The U.S. is actively engaged in discussions with several nations, including Japan, while tensions between the U.S. and China are escalating.

Brad Bechtel, the global head of FX at Jefferies in New York, commented, “We are currently in a period of limited information due to the existing stalemate between China and the U.S. We are awaiting the outcomes of potential agreements with other countries.”

Bechtel added, “The announcement of deals with major countries could provide a framework for the U.S. administration’s objectives regarding tariffs.”

Japan is scheduled to commence tariff negotiations with the U.S. in Washington on Wednesday. Additionally, South Korean Finance Minister Choi Sang-mok plans to meet with U.S. Treasury Secretary Scott Bessent the following week to address trade-related matters.

U.S. Vice President JD Vance indicated on Tuesday that there is a strong possibility of the United States and Britain reaching a “significant agreement” on trade.

However, reaching trade agreements with China and the European Union is anticipated to require more time.

On Tuesday, Trump initiated an inquiry into possible new tariffs on all U.S. critical mineral imports to exert pressure on China, the industry leader.

U.S. data released on Wednesday revealed a surge in retail sales during March, driven by increased household purchases of motor vehicles in anticipation of tariffs. Federal Reserve Chair Jerome Powell is scheduled to deliver a speech later on Wednesday.

The euro experienced a rise of 0.77% on the day, reaching $1.1368, but remained below its three-year high of $1.1473 attained on Friday.

The dollar weakened by 0.53% to 142.47 Japanese yen, previously reaching 142.03, slightly dipping below Friday’s low to its lowest exchange rate since September 30.

Bechtel highlighted decreasing trading volumes ahead of the Good Friday holiday, during which most U.S. markets will be closed, although foreign exchange markets will remain operational.

The dollar decreased by 1.03% against the Swiss franc, reaching 0.815, marginally above Friday’s 10-year low.

The Swiss franc has demonstrated the most significant appreciation among G10 currencies since the tariff announcement on April 2. The resulting disinflationary effect may prompt the Swiss National Bank (SNB) to reinstate negative interest rates.

The SNB frequently intervenes directly in markets to moderate the franc’s movements. However, given Washington’s concerns about such actions, there is a risk of repercussions. Chris Turner, global head of markets at ING, suggested that market speculation regarding potential SNB intervention could increase traders’ confidence in purchasing the franc.