The US dollar climbed to a one-week high and Treasury yields rose Thursday after a major legal setback for former President Donald Trump’s global tariff strategy sparked a shift in investor sentiment.
The US Court of International Trade ruled that Trump had wrongfully used emergency powers to justify sweeping tariffs on imports, sending the dollar up as much as 0.4%. The court’s decision suspends a vast portion of Trump’s tariffs — including flat global rates, elevated duties on Chinese goods, and fentanyl-related levies on China, Canada, and Mexico. The White House said it plans to appeal.
“There’s a knee-jerk reaction in markets suggesting we might be going back somewhat to a pre-tariff world,” said Mingze Wu, a currency trader at StoneX in Singapore. “The dollar has been sold heavily on the tariffs, so it makes sense we’re seeing the opposite happen now.”
The dollar index has fallen more than 7% since February, reflecting market concerns over the trade war’s impact on US assets. But the court ruling appears to have eased some of those jitters, at least for now.
David Forrester of Credit Agricole CIB called the US dollar “the biggest beneficiary” of the ruling, noting it reversed the “sell US” trend seen since early spring. He said traditional safe-haven currencies — the euro, Swiss franc, and Japanese yen — were among the hardest hit.
The yen, in particular, extended its decline, now heading for its longest losing streak this year. “Bullish positioning on the yen has left it exposed to selling pressure,” said Chidu Narayanan of Wells Fargo, though he warned dollar gains might be limited if the government’s appeal advances.
Bond markets also reacted sharply. Yields on 10-year Treasuries rose four basis points to 4.52%, while two-year yields briefly climbed six basis points to 4.05%.
Despite the dollar’s rebound, options markets signal lingering caution. One-month risk reversals still favor downside protection, and data from the Depository Trust & Clearing Corporation shows bearish options positions outweigh bullish ones by around $13 billion.
Among major currencies, traders remain most confident in future gains for the euro, Swiss franc, Norwegian krone, and New Zealand dollar.
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