The dollar on Thursday took a breather amid a sharp bounce after President Donald Trump backed away from threats to fire Federal Reserve chair Jerome Powell and his administration opened the door to a softer stance on China tariffs.
The US currency, after dipping below 140 yen on Tuesday, has rebounded off major chart support and was last at 143.25 yen on Thursday.
The dollar reportedly caught an extra boost when Treasury Secretary Scott Bessent said the US did not have a specific currency target in mind, ahead of talks with his Japanese counterpart.
According to Bessent, the current de-facto embargo on US-China trade was unsustainable, while warning that the US would not move first in lowering its levies of more than 100% on Chinese goods.
The dollar has recovered from a three-and-a-half-year low of $1.1572 per euro, but had a little selling in the Asia morning to steady around $1.1338.
ING currency strategist Francesco Pesole, in a note to clients, said that it is clear, by now, that no other currency is as sensitive to trade headlines as the dollar.
“We still think the balance of risks remains skewed to the downside for USD in the near term, but we don't expect a repetition of the one-way traffic in dollar selling we have witnessed of late,” he said.
He added that EUR/USD remains almost entirely a function of USD moves, stating that another leg higher above $1.15 remains possible should fears about the Fed's independence take centre stage again.
In the same vein, the Australian and New Zealand dollars were off recent peaks – although not all that much.
After briefly breaching $0.64 this week, the Aussie was at $0.6361 and Commonwealth Bank strategist Joe Capurso said it could test resistance around its 50-day moving average at $0.6286 as worries about global growth persist.
The New Zealand dollar held on at $0.5949.
Sterling and the Swiss franc each steadied after a sharp retreat, leaving sterling at $1.3263 and the Swissy at 0.8290 per dollar.
China's yuan was steady around 7.29 per dollar in early trade.
