By Ankur Banerjee
SINGAPORE (Reuters) – The dollar began Monday on a weak note after significant losses last week due to a potentially weakening U.S. labour market, while concerns over a global trade war led investors to safe havens, lifting the yen and the Swiss franc.
Markets have been fixated on simmering trade tensions across the world as U.S. President Donald Trump slapped tariffs on top trading partners only to delay some of them for a month amid growing signs and fears of the U.S. economy slowing down.
That has led to investors losing faith in the U.S. economy which has been outperforming its peers. On currency futures markets, investors have slashed net long dollar positions to $15.3 billion from a nine-year high of $35.2 billion in late January.
Risk-averse investors have sought the Japanese yen and Swiss franc instead sending both currencies to multi-month highs. On Monday, the yen was 0.5% firmer at 147.27 per dollar, just shy of the five-month high it touched on Friday.
The Swiss franc hit a three-month high of $0.87665 in early trading. The euro was 0.3% higher at $1.086725 after clocking its best weekly performance since 2009 last week boosted by Germany’s game-changing fiscal reforms.
That left the dollar index, which measures the U.S. currency against six others, at 103.59 on Monday, stuck near a four-month low touched last week.
The dollar fell more than 3% last week against major rivals, clocking its weakest weekly performance since November 2022 as investors fret about tariffs and its impact on the economy.
Adding to investor jitters, Trump in a Fox News interview on Sunday declined to predict whether the U.S. could face a recession amid stock market concerns about his tariff actions on Mexico, Canada and China.
“There is a period of transition, because what we’re doing is very big. We’re bringing wealth back to America,” Trump told the “Sunday Morning Futures” programme.
Tony Sycamore, market analyst at IG, said the comments are exactly the type of thing risk assets didn’t want to hear after a tough three weeks. “Strap in tight – we have all the ingredients in place for another testing week ahead.”
Investors were also digesting data from Friday that showed U.S. job growth picked up in February, but cracks are emerging in the once-resilient labour market amid a chaotic trade policy.
Nonfarm payrolls increased by 151,000 jobs last month after rising by a downwardly revised 125,000 in January, the Labor Department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast payrolls advancing by 160,000 jobs after a previously reported 143,000 gain in January.
Citi strategists said the data should keep the Federal Reserve comfortable staying on hold at this month’s meeting, but details of the jobs report, including a rise in the unemployment rate and drop in participation, suggest the labour market could soften further this spring.
“The slowdown in consumer spending, upcoming government job loss and decline in equity prices will likely have the Fed cutting policy rates again in May,” they said in a note.
Traders are pricing in 75 basis points of cuts from the Fed this year, LSEG data showed, with a rate cut fully priced in for June.
Fed Chair Jerome Powell said on Friday it remains to be seen if the Trump administration’s tariff plans will prove to be inflationary, mapping out a checklist of things that could cause new import taxes to lead to more persistent price pressures.
In other currencies, sterling rose 0.16% to $1.2941, while the Australian dollar was 0.14% higher at $0.6315. The New Zealand dollar last bought $0.57225.
(Reporting by Ankur Banerjee in Singapore, additional reporting by Kevin Buckland in Tokyo; Editing by Jacqueline Wong)
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