Dollar Takes a Breather

SINGAPORE (Reuters) – The dollar took a breather on Thursday following 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.

After dipping below 140 yen on Tuesday, the dollar rebounded off major chart support, last recorded at 143.25 yen on Thursday.

An additional boost came when Treasury Secretary Scott Bessent stated that the U.S. did not have a specific currency target in mind ahead of talks with his Japanese counterpart. He also indicated that the current de-facto embargo on U.S.-China trade was unsustainable, while cautioning the U.S. would not be the first to lower 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 faced some selling in the Asia morning, stabilizing around $1.1338.

It is now clear that no other currency is as sensitive to trade headlines as the dollar, noted ING currency strategist Francesco Pesole in a client memo. “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.

Pesole added, “That said, EUR/USD remains almost entirely a function of USD moves. And another leg higher above $1.15 remains possible should fears about the Fed’s independence take center stage again.”

The Australian and New Zealand dollars were also off recent peaks, albeit slightly. The Aussie, after briefly breaching $0.64 this week, was at $0.6361, with Commonwealth Bank strategist Joe Capurso suggesting it could test resistance around its 50-day moving average at $0.6286 amid ongoing concerns about global growth. The New Zealand dollar held steady at $0.5949.

Sterling and the Swiss franc steadied following a sharp retreat, with sterling at $1.3263 and the Swissy at 0.8290 per dollar.

China’s yuan remained stable around 7.29 per dollar in early trading.