The U.S. dollar strengthened on Friday as investors turned their attention to President Donald Trump’s tariff threats.
Some analysts say that despite a string of tariff announcements from the White House since Trump returned to power last month, the approach may be more of a negotiating tactic than a real policy objective. While he has issued a series of threats against countries around the world, Trump’s actions so far have been more subdued than the sweeping levies he promised during his 2024 election campaign.
Trump has raised the possibility of a trade deal with China, something that analysts at ING said is “theoretically the most important” for the currency market.
Meanwhile, sentiment towards the U.S. dollar was hit earlier this week by weak economic data and disappointing sales forecasts from Walmart, a large retailer often seen as a benchmark for U.S. consumer spending.
Still, the fourth-quarter earnings report was overall strong, with Walmart executives saying they saw “resilience” among American shoppers despite inflation remaining above the Federal Reserve’s 2% target and concerns about the impact of tariffs on price growth.
The US dollar index, which measures the value of the greenback against a basket of major currencies, rose 0.4%.
Elsewhere, the euro fell 0.4% against the greenback to $1.0463 after data showed business activity in France contracted and growth in Germany picked up only slightly. Both countries are Europe's main economic powerhouses.
Sterling also edged down 0.2% to $1.2639.
In Japan, core consumer prices rose 3.2% in January from a year earlier, the fastest pace in 19 months. Other data showed the country's manufacturing activity continued to decline for an eighth straight month in February as labor shortages and persistent inflation continued.
The Bank of Japan (BoJ) recently raised its short-term interest rate to 0.5% and is expected to consider further increases, potentially to 0.75% in the third quarter of 2025 if wage growth and spending patterns continue to support sustained inflation.
The yen hit a two-and-a-half-month high against the US dollar earlier in the day, reflecting market expectations of higher Japanese interest rates, even as BoJ Governor Kazuo Ueda said the central bank may control long-term borrowing costs by buying government bonds.
