Dollar treads water as Trump tariff clarity, central banks awaited

Dollar treads water as Trump tariff clarity, central banks awaited

The dollar steadied against major peers on Thursday, continuing its near paralysis of the past two days before more concrete announcements on tariffs from U.S. President Donald Trump.

A spate of central bank policy decisions are also due over the next week, with the Bank of Japan widely expected to raise interest rates at the end of a two-day meeting on Friday.

Rate decisions from the U.S. Federal Reserve and European Central Bank are scheduled for Wednesday and Thursday of next week, respectively.

The dollar index – which measures the currency versus six top rivals, including the euro and yen – was flat at 108.25, following two days of gains of around 0.1%.

On Monday, it tumbled 1.2%, its steepest one-day slide since November 2023, as Trump's first day in office brought a barrage of executive orders, but none on tariffs.

So far this week, Trump has mooted levies of around 25% on Canada and Mexico and 10% on China from Feb. 1. He also promised duties on European imports, without giving details.

"President Trump has so far taken a less hostile-than-expected approach to China," amid overall "softer-than-expected policies and tone on tariffs", said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

At the same time, "we are cautious (that) risk sentiment remains fragile and can quickly turn sour if President Trump strikes a more aggressive tone."

The Chinese yuan was little changed at 7.2812 per dollar in offshore trading.

Japan's yen edged up about 0.1% to 156.40 with markets pricing 95% odds of a quarter-point hike on Friday.

The euro was flat at $1.0411. The ECB is widely expected to cut rates by a quarter point next week.

The Canadian dollar held steady at C$1.4386 against the greenback. The Bank of Canada is seen as likely to reduce rates by a quarter point next Wednesday.

The Mexican peso was little changed at 20.47 versus the U.S. currency.