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Powell pushes back on easing due to tariff-induced inflation
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Australian dollar hits five-year low against dollar
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US dollar hits a six-month low versus safe-haven Swiss Franc
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Investors weigh dollar's status as a safe haven currency
(Updates prices, analyst comments)
By Laura Matthews
NEW YORK, April 4 (Reuters) - The U.S. dollar rebounded
against major currencies such as the euro and yen on Friday after
Federal Reserve Chairman Jerome Powell acknowledged the repercussions
of larger-than-expected U.S. tariffs and signaled a cautious tone on
future easing.
Powell said tariffs increased the risk of higher inflation and
slower growth, highlighting the difficult path ahead for policymakers
at the U.S. central bank.
The Australian dollar, meanwhile, seen as a liquid proxy for the
yuan, hit five-year lows against the greenback after China announced
additional tariffs on U.S. goods on Friday.
"This is a bit of a more hawkish reaction that he's focusing on
the inflationary impact of tariffs. The U.S. economy has been dealing
with higher inflation, and because the U.S. is the one doing the
tariffs and it will apply to all imports, it's likely to have more
impact on the U.S.," said Peter Vassallo, FX portfolio manager at BNP
Paribas Asset Management.
"The inflationary concerns are real, and this makes sense as we
think about the fact that inflation, for five years now, has been
running above target."
Powell's comments followed data earlier in the day showing that
nonfarm payrolls rose by 228,000 jobs last month after a downwardly
revised 117,000 rise in February, well above the 135,000 forecast. The
unemployment rate ticked up to 4.2% from 4.1%.
Markets drew little comfort from the numbers because "they don't
factor in any of this week's events or the fallout that will
inevitably come with them over the next few weeks," said Helen Given,
director of trading, Monex USA.
China announced additional tariffs of 34% on all U.S. goods,
starting April 10. The move added to recession concerns and
intensified a global stock market rout.
A closely-watched inflation indicator next week will show how much
the prices of goods and services are changing for consumers.
The euro was last down 0.95% to $1.10947. It had jumped
1.8% on Thursday - its biggest daily rise since November 2022 -
reaching as high as $1.1147, a level not seen since September 30.
The euro posted its largest weekly rise since March 3.
Markets are predicting four quarter-point interest rate cuts from
the Fed in the remainder of this year, and reduced the odds of further
Bank of Japan tightening to 11 bps.
They also fully priced in three 25 basis point European Central
Bank rate cuts by December.
The dollar index, a measure of the currency against a
basket of six major peers, had plunged 1.9% on Thursday, its worst day
since November 2022. It rose 0.98% to 103 in afternoon trading on
Friday.
The Swiss Franc rose 0.6% versus the euro and hit a
six-month high versus the dollar.
Meanwhile, sterling declined 1.61% to $1.2889, after
pushing as high as $1.3207 a day earlier, the first time since October
3. It was the pound's largest weekly decline since February 24.
Deutsche Bank warned on Thursday of the risk of a crisis of
confidence in the U.S. dollar, saying major shifts in capital flow
allocations could take over from currency fundamentals and spark
disorderly currency moves.
As Chinese markets observed a national holiday on Friday, the
dollar edged up 0.2% at 7.2959 yuan in offshore trade. On
Thursday, it had leapt as much as 0.7% to a two-month high at 7.3485.
The Australian dollar, which fell to its lowest since
early April 2020, was last down 4.42% at $0.60490. Similarly, the New
Zealand dollar was down 3.42% to $0.55960. The Aussie dollar
posted its largest weekly loss since March 2020.
The Canadian dollar dropped 0.81% to 1.4208.
Meanwhile, the greenback pared losses against the yen, trading up
0.58% to 146.92 yen. It had slumped 2.2% in the prior
session, at one point dipping as low as 145.19 yen for the first time
since October 2. On the week, the dollar is down the most since early
February.
China faces combined duties of some 64%, when also factoring in a
tariff of 10% that Trump levied in his first presidential term. Both
China and the EU vowed countermeasures, raising the risk of a broader
trade war.
Currency
bid
prices at
4 April?
8:25 p.m.
GMT
Descripti RIC Last U.S. Pct YTD Pct High Low
on Close Change Bid Bid
Previous
Session
Dollar 53
Euro/Doll 925
Dollar/Ye 58
Euro/Yen 04
Dollar/Sw 78
Sterling/ 857?
Dollar/Ca 54
Aussie/Do 987
Euro/Swis 64
Euro/Ster 32
NZ 53
llar
Dollar/No 066
Euro/Norw 03
Dollar/Sw 51
Euro/Swed 94
(Additional reporting by Stefano Rebaudo; Editing by Shri Navaratnam,
Clarence Fernandez, Toby Chopra, Nia Williams and Rod Nickel)
Line of Credit 
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