The Dollar traded within tight ranges against major currencies on Thursday, as it remained directionless amid a lack of definitive tariff announcements from US President Donald Trump.
In the coming week, central bank policy decisions could drive currency movements, with the Bank of Japan expected to raise interest rates following its two-day meeting ending on Friday.
Rate decisions from the Federal Reserve and the European Central Bank are set for next Wednesday and Thursday, respectively.
The Dollar index, which tracks the currency against six major rivals, was up 0.09% at 108.37 at the time of writing.
It fell 1.2% on Monday, marking its largest one-day drop since November 2023, as Trump's first day in office saw a flurry of executive orders but no tariff-related announcements.
Earlier in January, the greenback had risen to a two-year high of 110.17 on the strength of the US economy and expectations of broad US tariffs, which could weaken other currencies.
The single currency was down 0.15% at $1.0394, with the European Central Bank expected to cut rates by a quarter point next week, Reuters reports.
This week, Trump has proposed tariffs of around 25% on Canada and Mexico, and 10% on China starting 1st February. He also mentioned imposing duties on European imports.
“President Trump has so far taken a less hostile-than-expected approach to China,” amid overall “softer-than-expected policies and tone on tariffs,” stated Carol Kong, Commonwealth Bank of Australia currency strategist.
Yet “we are cautious (that) risk sentiment remains fragile and can quickly turn sour if President Trump strikes a more aggressive tone,” she added.
Furthermore, Trump signed a trade memo on Monday directing federal agencies to review various trade issues by 1st April, a date many market participants believe will be crucial in unveiling tariff plans.
The Dollar rose 0.15% against China’s Yuan in offshore trading, reaching 7.294 Yuan. Since Trump’s inauguration, the Dollar has dropped approximately 0.5% against the Yuan.
“There was a fear that there would be big tariffs on day one, that the Chinese Renminbi would weaken,” according to Jane Foley, head of FX strategy at Rabobank.
“But now you've had the news from China overnight about insurers supporting the stock market. You've had a different tone, including a call with Trump and Xi on Friday, and it's promoted maybe a different perception of where the opportunities are.”
On Thursday, China revealed plans to direct hundreds of billions of Yuan in investment from state-owned insurers into the stock market.