The US dollar strengthened against almost all major currencies on Friday after US President Donald Trump's move to raise tariffs on Canada and other trading partners sparked a surge in demand for safe-haven assets.
Trump issued a letter stating that a 35% tariff rate on all imports from Canada would take effect from August 1. The European Union is expected to receive a similar letter by Friday.
The US president, who has shaken up the global trade landscape with his tariff wave, has proposed a blanket tariff rate of 15% to 20% on other countries, up from the current base rate of 10%.
This week, Trump surprised Brazil, which has a trade surplus with the US, by imposing tariffs of 50%, including on copper, pharmaceuticals and semiconductor chips.
The euro fell 0.1% to $1.1689 after Trump said the European Union could receive a letter on tariffs as early as Friday, raising questions about the progress of Brussels-Washington trade talks. The US dollar also strengthened 0.6% against the yen to 147.05 yen.
The Canadian dollar fell 0.2% to C$1.3687 after plunging more than 0.5% after Trump announced the new tariffs. The Brazilian real fell 0.7% against the US dollar.
The market reaction to the new round of tariffs was more subdued than the market plunge after the “Liberation Day” announcement in April. But investors remained wary of the future of global trade and whether the August 1 deadline would hold.
While tariff concerns supported the US dollar’s strength, some traders remained skeptical about the US dollar’s performance in the medium term, as the currency has been under significant selling pressure this year.
Also supporting the US dollar were robust labor market data and minutes from the Federal Reserve’s latest monetary policy meeting that reduced market expectations for a rate cut in the near term.
The US dollar index has fallen nearly 10% so far this year, driven by concerns that economic data will reveal wider damage from US policies on the world's largest economy.
Meanwhile, the British pound fell 0.5% to a two-week low of $1.3513 after data showed the UK economy shrank for a second straight month in May.
Crypto markets also surged, buoyed by institutional demand and US policies that are friendly to digital assets. Bitcoin rose 3.7% to a new high of $118,832 while ethereum surged 5.9% to $2,987.15.
