The U.S. dollar edged higher in Asian trading on Thursday, rebounding from multi-month lows against the yen as U.S.-Japan trade talks steered clear of currency issues, easing fears of official efforts to strengthen the yen. However, the dollar’s broader downtrend remains intact amid ongoing doubts about U.S. economic stability, tariff policy volatility, and increasing market momentum toward global rate cuts.
Dollar Lifts Off Yen Lows After FX Talks Avoided
- The dollar rebounded to ¥142.61 from a seven-month low of ¥141.62, following comments by Japan’s Economy Minister Ryosei Akazawa that foreign exchange was not discussed during trade meetings in Washington.
- The yen had rallied in recent weeks on speculation the U.S. and Japan might agree on a stronger yen, but with that idea now in doubt, some of the record-long yen positions may be at risk of unwinding.
Dollar Finds Temporary Floor, but Faces Headwinds
- The U.S. Dollar Index (DXY) nudged up to 99.60, but remains close to recent lows
- The Swiss franc, euro, and yen have all posted major gains since early April:
- CHF/USD up ~8% since April 2, trading at 0.8167, nearing decade-high resistance at 0.81
- EUR/USD eased slightly to $1.1362, but remains close to a fourth straight weekly gain
- JPY/USD is up ~5% in just over two weeks
ECB Expected to Cut; Euro Still Firm
- The European Central Bank is widely expected to deliver a 25-basis-point rate cut later Thursday
- Yet the euro remains resilient, helped by flows out of U.S. assets and optimism over Europe’s improving inflation backdrop
- Citi sees the euro climbing to $1.20 in the next 6 to 12 months, before any meaningful dollar rebound begins
Kiwi and Aussie Near Breakout Zones
- NZD/USD is trading at $0.5912, above its 50- and 200-day moving averages
- A hot inflation print earlier this week briefly boosted the kiwi, but markets still see RBNZ cuts coming
- AUD/USD fell 0.4% to $0.6343
- A strong jobs report was largely ignored, with a May rate cut still priced in
- The Aussie remains near breakout levels, with the dollar’s weakness the key variable
Sterling Pauses as Inflation Cools
- GBP/USD was steady at $1.3216, after earlier touching a six-month high
- Wednesday’s softer-than-expected inflation reading tempered hawkish Bank of England bets, limiting further pound upside
Light Trading Ahead of Easter
- Markets are expected to quiet ahead of the Good Friday and Easter Monday holidays
- With many major centers closed, liquidity will thin, increasing potential for volatility around any surprise headlines
Outlook: Dollar Bounce May Be Short-Lived
The dollar’s rebound on Thursday appears to be more about positioning ahead of the holiday break than any fundamental shift. Headwinds remain:
- Tariff-induced recession risks
- Uncertain Fed trajectory, despite Powell’s patient tone
- Stronger foreign currencies buoyed by investor reallocation
Unless U.S. macro data surprises to the upside or geopolitical tensions ease, the dollar’s longer-term outlook remains biased to the downside.