Trump tariff expectations lift Dollar Index near 3

The Foreign exchange tradingUS Dollar Index (DXY) remains stable during the Asian trading session, currently at 104.1189, slightly down by 0.04%, still close to last Friday’s three-week high of 104.22. The index rose by 0.4% last week, marking the first weekly increase this month. The current market sentiment is dominated by rising US Treasury yields and the anticipation of Trump's new round of retaliatory tariff policies. The dollar is seeking a balance between caution and support.

According to the White House, the Trump administration plans to announce reciprocal tariffs on multiple countries on April 2, with the market keenly watching its scope and specifics. This news has prompted investors to reassess the global trade situation. Earlier this year, the market anticipated potential stimulative growth policies from Trump, but his increasingly aggressive trade stance has increased the risk of economic slowdown, putting pressure on the dollar.

Goldman Sachs analysts stated that after lowering dollar forecasts last week, they still believe the dollar is likely to stabilize and rebound near current levels. The firm noted that the market has preemptively adjusted its expectations for US economic growth in 2025, even faster than Goldman’s own forecast pace. Although Goldman economists have downgraded growth forecasts due to potential tariff impacts, they still see this as generally favorable for the dollar.

In terms of US Treasury yields, the 10-year yield rose by 2.5 basis points to 4.2770% on Monday, supporting a 0.3% rise in the dollar against the yen, now at 149.77. Analysts noted that the rising yields reflect the market absorbing the potential for the Federal Reserve to maintain a hawkish stance, thereby supporting the dollar.

Regarding the euro, it increased by 0.24% against the dollar, now at 1.0836, rebounding from last Friday’s three-week low of 1.0795. Previously, Germany’s easing of the "debt brake" policy to increase military and infrastructure investment temporarily pushed the euro to a near six-month high of 1.0955, but after the bill passed the German upper house on Friday, the euro pulled back. Analysts from the Commonwealth Bank of Australia indicated that although the bill passed, its fiscal spending effects may take longer to manifest, offering limited short-term support for the euro, while the uncertainty surrounding Trump’s tariffs remains a dominant risk factor.

From a technical perspective, the Dollar Index broke through the key level of 104 last week. If subsequent tariff policies are relatively mild and US economic data remains strong, the DXY could further rise to 105. Conversely, if trade tensions intensify, sparking recession fears, the Dollar Index might retest the 103 support level.

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