Dollar Slips as Tariff Tensions Rise, Markets Eye Jobs Report and Fed Speech

The U.S. dollar continued to face pressure on Friday, hovering near six-month lows against the safe-haven yen, as markets reacted to President Donald Trump's aggressive new tariffs and braced for key U.S. economic data.

After plunging 1.9% Thursday—its sharpest drop since November 2022—the U.S. dollar index steadied, but investor sentiment remained fragile. Trump’s announcement of a 10% baseline tariff on all imports, including 20% on EU goods, 24% on Japanese products, and 54% total on Chinese imports, rattled global markets. Both China and the EU vowed retaliation, raising fears of a full-scale trade war that could tip the global economy into recession and fuel inflation.

The dollar weakened 0.15% to 145.89 yen after dropping 2.2% the previous session, touching a low not seen since early October. The euro edged up 0.08% to $1.1060, while sterling held steady at $1.3103. Offshore, the yuan eased 0.13% to 7.2686 despite China’s market holiday.

Investors now await the U.S. nonfarm payrolls report, expected to show a slowdown in job growth to 135,000 in March. A weaker report could solidify expectations for Federal Reserve rate cuts. Traders are pricing in four quarter-point cuts this year, starting as early as June.

Yields on two-year U.S. Treasuries dropped further, slipping 6 basis points to 3.6611% after an 18-point plunge on Thursday. Fed Chair Jerome Powell is also set to speak later Friday, which could provide more insight into the central bank’s monetary policy stance.

Risk-sensitive currencies like the Australian and New Zealand dollars remained weak, while bitcoin climbed 0.9% to over $83,000, showing resilience amid broader market volatility.