Dollar Near Multi-Year Lows Amid Tariff Uncertainty and Investor Caution

The U.S. dollar held steady on Tuesday but remained close to a three-year low against the euro and a six-month low against the yen as investors navigated ongoing volatility in U.S. trade policy. The greenback was last up 0.27% at 143.53 yen, still near Friday’s low of 142.05. The euro slipped 0.22% to $1.1324 after hitting $1.1474 last week, its highest level in three years.

After a sharp drop last week, the dollar rose 0.3% against the Swiss franc in Asian trading, though it is still down nearly 8% this month—on track for its worst monthly performance since December 2008.

Market sentiment has been shaken by the unpredictable back-and-forth on U.S. tariffs. While the recent exemption of smartphones and electronics from China tariffs briefly eased tensions, President Trump’s mixed signals suggest this relief may be short-lived. The resulting policy confusion has weakened the dollar’s traditional safe-haven appeal.

According to Kieran Williams of InTouch Capital Markets, uncertainty is driving a slow rotation away from dollar-denominated assets. Prashant Newnaha of TD Securities noted last week’s turbulence was marked by liquidation and asset reallocation, though this week has been calmer.

The U.S. 10-year Treasury yield held at 4.354%, following its steepest weekly climb in two decades. Fed officials’ recent dovish comments have added to speculation of interest rate cuts. Fed Governor Christopher Waller flagged Trump’s tariff stance as a potential recession trigger, even amid persistent inflation.

Traders now expect around 86 basis points of Fed rate cuts by year-end. The dollar index hovered at 99.864, nearing its lowest since 2022. Meanwhile, sterling stayed firm at $1.31825, the Aussie edged up to $0.63415, and the Kiwi gained 0.41% to $0.58985.