Dollar Pauses After Bounce as Fed and Tariff Jitters Ease

The U.S. dollar took a breather on Thursday after rallying on easing tensions over Federal Reserve leadership and U.S.-China trade policy. President Donald Trump stepped back from threats to fire Fed Chair Jerome Powell, while the White House signaled a more flexible stance on tariffs, reducing market anxiety.

After briefly dipping below 140 yen earlier in the week, the greenback rebounded and was last seen trading at 143.25 yen. Support also came from U.S. Treasury Secretary Scott Bessent, who stated the U.S. had no fixed currency target ahead of discussions with Japan. He added that the current trade embargo with China was "unsustainable," but emphasized the U.S. would not be the first to ease its steep tariffs on Chinese imports.

The euro edged lower to $1.1338 after recovering from a three-and-a-half-year low of $1.1572. ING currency strategist Francesco Pesole noted that the dollar remains highly sensitive to trade developments, cautioning that while short-term risks for the USD are tilted to the downside, recent heavy selling may not persist.

The euro-dollar exchange rate, Pesole added, is closely tied to broader dollar movements, with a rise above $1.15 possible if concerns resurface over the Fed’s independence.

Commodity-linked currencies also retreated slightly. The Australian dollar hovered at $0.6361, with resistance seen near its 50-day moving average of $0.6286 amid global growth concerns. The New Zealand dollar remained firm at $0.5949.

Sterling stabilized at $1.3263, and the Swiss franc held steady at 0.8290 per dollar. China’s yuan was little changed, trading around 7.29 per dollar during early Asia hours.