U.S. Dollar Strengthens on Trade Progress and Economic Optimism

The U.S. dollar is set for a third consecutive weekly gain, buoyed by signs of trade dialogue progress and stronger-than-expected economic data. Investors’ confidence in the world’s largest economy is recovering, following last month’s slump driven by concerns over President Donald Trump’s unpredictable tariff strategies.

Wall Street rallied overnight, supported by upbeat tech earnings and a slightly better manufacturing report, which, despite showing ongoing contraction, helped calm recession fears. Traders now await the upcoming U.S. nonfarm payrolls data, with economists projecting 130,000 new jobs for the month—down from February’s 228,000. The results are likely to influence expectations for the Federal Reserve's next rate move.

Chris Weston of Pepperstone noted that stronger data could lift U.S. two-year Treasury yields, pushing the dollar and equities higher while increasing selling pressure on gold.

The dollar index held steady in early Asia trade, poised for a 0.5% weekly rise amid light holiday trading. The greenback hovered at 145.53 yen, near a three-week peak, while the euro stayed at $1.1290, close to a three-week low. The Australian dollar edged up 0.2% to $0.6396.

Chinese state media reported that Washington had approached Beijing to resume tariff talks, suggesting a potential thaw in relations. Meanwhile, Japan’s top trade official expressed interest in holding another round of negotiations with the U.S. in mid-May.

In the latest economic data, U.S. initial jobless claims hit a two-month high, further fueling attention on labor market trends. ANZ analysts said the Federal Reserve is likely to remain cautious, focusing on inflation unless the labor market deteriorates significantly.

The dollar’s resilience highlights investor optimism amid improving data and hopes for renewed global trade discussions.