At the same time, he singled out China for additional levies, taking the tariff rate to 125% for Chinese imports with immediate effect, after Beijing countered previous U.S. duties with an 84% tariff rate.
The announcement drove sharp swings across assets from government bonds to commodities, and currencies were no exception – in knee jerk moves the safe haven Swiss franc and Japanese yen weakened, and the Australian dollar, often seen as a proxy for investors’ attitude to global growth, strengthened.
Traders were fine tuning their positions on Thursday and generally in a dollar negative direction, and the dollar dropped 0.66% on the yen to 146.7 and 0.5% on the franc to 0.8539.
Over a longer time frame, the U.S. currency remains lower on both safe havens since the reciprocal tariffs were first announced on April 2, and so far in April, it has lost 2% on the yen and 3.5% on the franc.
Part of the pressure on the dollar was a result of falling U.S. Treasury yields, a resumption of the traditional correlation which broke down on Wednesday in Asia and European trade when the dollar weakened even as a steep selloff in Treasuries sent yields higher. There also remained a sense of nervousness about the U.S. currency as a result of Trump’s flip-flops on trade policy. Chris Turner global head of research at ING flagged the yen in a morning note, observing the dollar/yen pair in recent years “has typically been trading in a 150-155 range when US 10-year Treasury yields are up at 4.25/30% as they are today”.
“The fact that USD/JPY is still trading on a 146 handle suggests this flip-flopping of policy is now demanding a higher risk premium of U.S. asset markets.”
The dollar was also weaker elsewhere with the euro up 0.7% at $1.1024 and the pound up 0.35% at $1.2875.
Risk sensitive currencies were also firmer with the Australian dollar up 0.2% at $0.6164, and another currency correlated to the stock market, the Swedish crown, firmer too at 9.936 crowns to the dollar.
The Chinese yuan also drew attention and the onshore yuan slipped to 7.3518 a dollar in early trade, its weakest since December 26, 2007, but was last trading slightly stronger on the day at 7.344 per dollar.
China’s central bank cut guidance for the official yuan rate for a sixth successive trading session on Thursday, signalling an intention to allow a very gradual depreciation.
Investors are waiting to see whether Chinese authorities use currency depreciation as part of their trade war with the U.S.
The offshore yuan was also slightly weaker at 7.3575 per dollar. It has seen dramatic moves in recent sessions, but remains well off Tuesday’s record level of 7.4288 to the dollar.
