The dollar is headed for its first weekly gain since mid-March on April 25 after China issued some tariff exemptions for U.S. imports. Beijing granted tariff exemptions, hoping the trade war between the world’s two largest economies may be closer to easing.
The dollar surged against several currencies, up around 0.2% on Friday and set for a weekly gain, its first since the middle of March. The U.S. currency has dropped 4% since Trump first announced his “Liberation Day” tariffs on April 2.
Dollar bounces back on signs of easing U.S.-China tensions
Is the US #Dollar preparing for a bullish comeback?
Several key indicators next week could shift the current bullish setup amid ongoing #Trump–#China trade talks:
– US Advance #GDP & Core #PCE – Wed
– #BOJ rate decision & US ISM PMI – Thu
– US #NFP – Fri
– Mega Cap #Earnings –… pic.twitter.com/7N0UXmtjEY— Razan Hilal, CMT (@RH_Waves) April 25, 2025
This week, the U.S. currency experienced a bounce back following conflicting signs of ease in the heightened relations between Washington and Beijing. The dollar showed its first weekly gains since March on Friday after China granted some tariff exemptions for U.S. imports.
U.S. President Donald Trump suggested on Tuesday a de-escalation of their continued tariff battle, adding that direct talks were already ongoing. In a Friday interview with Time Magazine, he also said that his administration was talking with China to strike a tariff deal and that Chinese President Xi Jinping also called him.
On April 25, several businesses notified of the changes said China issued some exemptions from its 125% tariffs on U.S. imports. The country also allegedly asked companies to identify the goods eligible for exemptions.
“I don’t think that anything’s necessarily much clearer now, but it does feel like there’s no more ramping up. It feels like it’s coming the other way, and if anything, it seems to be heading more towards de-escalation than escalation.”
~ Fiona Cincotta, Market Strategist at City Index.
Cincotta acknowledged that she has seen the dollar pull out of oversold territory before. She also argued that it’s too early to celebrate the dollar recovery because “we’re not quite there yet.”
The dollar outperforms safe haven currencies
The U.S. currency surged by 0.82% on the day against the yen at 143.775. The dollar was also up 0.42% against the Swiss franc at 0.82985. The pound plummeted 0.12% to $1.332, while the euro dropped 0.24% to $1.1363, even after unexpectedly strong UK retail sales.
The President caused the dollar to drop against other major currencies at the start of the week after his threats to fire Federal Reserve Chair Jerome Powell for not cutting interest rates quickly enough. The dollar bounced back on Tuesday after Trump mentioned he never intended to replace the central bank boss.
South Korea and Japan have made some progress in early trade talks with Washington. After meeting U.S. Treasury Secretary Scott Bessent, Japan’s Finance Minister Katsunobu Katō stated they had no talks on currency targets. The country’s chief negotiator, Ryosei Akazawa, acknowledged that he will hold a second round of trade talks with Bessent next week. The U.S. President has also accused Tokyo of weakening its currency to help its exporters.
MUFG strategist Derek Halpenny argued that even if reports suggest there will be some easing of tariff rates, a hit to U.S. growth was on the way. He argued that the hit would ensure that volatility levels remain high, equity markets would be pressured to the downside, and the global backdrop would remain unfavorable for any sustained move higher in the dollar/yen.
Bank of Japan Governor Kazuo Ueda echoed on Thursday the central bank’s commitment to raising interest rates if the underlying inflation moved toward 2% as projected. He also acknowledged that policymakers needed to review the fallout from U.S. tariffs. The Bank of Japan is expected to maintain rates at current levels at its two-day meeting that ends on May 1.
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