Dollar Weakens as Trade War Fears and Labor Market Worries Shake Investors

The U.S. dollar started the week on a weak note after last week’s steep losses, driven by signs of a softening labor market and escalating global trade tensions. Investors shifted to safe-haven currencies like the Japanese yen and Swiss franc, pushing both to multi-month highs. The yen firmed 0.5% to 147.27 per dollar, while the Swiss franc hit a three-month high of $0.87665. The euro climbed 0.3% to $1.086725, benefiting from Germany’s fiscal reforms.

The dollar index hovered near a four-month low at 103.59, after a sharp 3% decline last week—its worst since November 2022. Currency futures showed investors slashing net long dollar positions to $15.3 billion from January’s $35.2 billion peak, signaling waning confidence in the U.S. economy.

Trade concerns deepened as President Trump imposed tariffs on key trading partners, only to delay some by a month, fueling market uncertainty. In a Fox News interview, Trump avoided recession predictions but defended his policies, calling them a transition toward economic strength. Analysts warned this could unsettle risk assets further.

Labor market concerns also weighed on sentiment. February’s nonfarm payrolls rose by 151,000, below forecasts, while unemployment increased and participation declined. Economists suggested the Federal Reserve might cut rates in May to counter slowing consumer spending and falling equity prices. Traders are pricing in 75 basis points of Fed cuts this year, with a June rate cut fully expected.

Elsewhere, the British pound edged up to $1.2941, while the Australian and New Zealand dollars also posted slight gains. Investors remain cautious as trade policy uncertainty and economic data drive market volatility.