US dollar extends gains as Trump unleashes new tariffs

The dollar moved toward its strongest weekly performance in nearly three years against major currencies, maintaining its momentum on Friday after President Donald Trump imposed new tariffs on dozens of trade partners.

Currencies of heavily impacted countries saw sharp declines, such as Switzerland, which now faces a 39% tariff. The Swiss franc dropped to its lowest level in six weeks, while the Canadian dollar headed for a seventh straight weekly loss.

The dollar also rose against other currencies for reasons unrelated to tariffs. The Japanese yen posted its worst weekly performance of the year after the Bank of Japan hinted it was not ready to resume interest rate hikes, prompting Finance Minister Katsunobu Kato to state on Friday that officials were "concerned" about the yen’s movements.

The US monthly jobs report is also scheduled for release on Friday, expected to show that 110,000 jobs were added to the labor market in July.

Much of the dollar’s strength this month stems from investor belief that Trump’s tariffs have not negatively impacted the US economy or caused a sharp spike in inflation.

Despite Trump’s pressure on Federal Reserve Chair Jerome Powell to cut interest rates, the US central bank has indicated it is in no rush. According to IG’s chief analyst Chris Beauchamp, Friday’s jobs report is unlikely to shift that stance significantly, even if the numbers come in weaker than expected, as it may only trigger some selling in US assets like the dollar.

Beauchamp said: “Fundamentally, the US economy is still in decent shape—not at its peak, but tariffs will have limited impact. The market looks exposed to short-term selling, simply as an excuse for profit-taking and waiting to see what happens.”

He added: “A large amount of weak economic data would need to be released between now and September for rate cut expectations to be revived.”

The dollar index, which measures the US currency’s performance against a basket of six major peers, has risen 2.4% this week—its best weekly performance since a 3.1% gain in September 2022. The index last rose 0.1% to 100.13, its highest level since late May.

Tariff impact

The Swiss franc, typically viewed as a safe haven, lost its usual standing, declining against a range of currencies amid a broad sell-off in equities and commodities in response to the high tariffs imposed by Trump. The US president also demanded that pharmaceutical companies—one of Switzerland’s key exports—cut drug prices for American consumers.

The dollar rose by as much as 0.6% to 0.8173 francs, its highest level in six weeks, while the euro gained 0.5% to trade at 0.932 francs.

The yen, another traditional safe-haven currency, posted slight gains against the dollar, with the greenback down 0.15% to 150.545 yen after touching its highest levels since late March.

The US dollar continued advancing against the Canadian dollar, up 0.13% to 1.38735, after the US imposed 35% tariffs on Canadian imports—up from the previously threatened 25%.

The euro remained near its two-month lows at $1.1408, still affected by what markets view as an unbalanced trade agreement with Washington.

Mike Holahan, Managing Director at Electus Financial in Auckland, said: “In the short term, there’s room for more dollar strength.” He added: “The bulk of the tariff news has been priced into the market.”

He continued: “This week’s big move was the repricing of the euro lower. The net result is that the trade deal between the EU and the US now stands as an added headwind for the euro.”

The EU–US framework trade agreement announced on Sunday was quickly criticized by French leaders and the European Parliament’s trade committee chair, who viewed it as unfair to Europe.