The dollar jumped on Friday, reversing losses from the previous day after a media report that China was considering waivers for tariffs on some US goods, raising hopes for a de-escalation in the escalating trade war between the world’s two largest economies.
The US currency has been battered this week by conflicting signals regarding an improvement in strained relations between Washington and Beijing.
On Tuesday, President Donald Trump discussed the possibility of de-escalating the tit-for-tat tariff war between them, confirming that direct talks were underway. Beijing later denied any such discussions had begun.
“Traders are definitely chasing headlines right now,” said Bart Wakabayashi, Tokyo branch manager at State Street.
“If there is any indication that these tariffs could be lifted, then there will be a reversal of the positions that were put in place because of them.”
Bloomberg News reported on Friday that China was considering suspending 125% tariffs on US medical equipment and some industrial chemicals.
The dollar rose 0.7% to 143.665 yen by 0435 GMT, and 0.6% to 0.8318 Swiss francs.
The euro fell 0.5% to $1.1327, while the pound fell 0.4% to $1.3287.
The U.S. dollar index, which measures the currency against these four rival currencies and two other major currencies, rose 0.4% to 99.792.
Trump rattled the U.S. dollar at beginning of the week, causing it to fall sharply against major currencies, after threatening to fire Federal Reserve Chairman Jerome Powell for not cutting interest rates quickly enough. dollar then rebounded on Tuesday when the president stated that he never intended to replace the central bank chief. Friday’s rise puts the dollar index on track to rise 0.6%, potentially breaking a four-week losing streak driven by fears of a US recession caused by tariffs and investors losing confidence in US assets due to Trump’s policy volatility.
The US dollar regains strength amid improving trade relations.
Global financial markets witnessed significant volatility during the last week of April 2025, as the US dollar rose against major currencies, driven by positive developments in US-China trade relations, along with indications of monetary policy stability in Japan.
Trump’s Statements and Their Impact on Markets
At the beginning of the week, President Donald Trump’s comments shook markets, as he suggested the possibility of firing Federal Reserve Chairman Jerome Powell for not cutting interest rates quickly enough. This statement led to a sharp decline in the dollar against major currencies. However, the dollar rebounded when Trump later stated that he never intended to replace the central bank chief, which helped restore some confidence in the markets.
Stocks and Dollar Look Forward to Weekly Gains on Signs of Tariff Easing
Asian stock markets saw gains on Friday, pushing them towards their second consecutive week of gains. Investors focused in particular on signals from the US and China that the two countries might be de-escalating their trade war. Meanwhile, the US dollar recorded its first weekly gain in more than a month. Optimism Grows in Stock Markets
US futures posted notable gains, with Google parent Alphabet capturing investor interest after it beat earnings expectations and confirmed its ambitious AI goals. A nearly 5% rise in Alphabet shares also led other tech companies to extend gains. European futures rose 0.6%, with the FTSE 100 gaining 0.2%.
On Wall Street, a mixed batch of corporate results was ignored, with the S&P 500 continuing its 2% rise.
Dollar Gains Amid Trade Hints
In the US dollar, the greenback showed notable strength, settling at $1.1330 to the euro and 143.6 to the Japanese yen. This increase comes amid signs that the tariff threat between the US and China has reached its peak.
Markets Tense Despite Optimism
Despite the optimism surrounding US-China trade negotiations, stock markets remain vulnerable to continued volatility. Markets in Hong Kong and China showed slight gains, while Japan posted significant gains. However, there are cautionary signs that the calm in the markets may be temporary.
Progress in Trade Negotiations with Asian Allies
Washington has made progress in trade talks with South Korea and Japan. A Seoul delegation reported that the two sides aim to formulate a trade package before lifting the suspension of mutual tariffs in July. For his part, the Japanese finance minister stated that there are no discussions on currency targets, despite Trump’s previous accusations that Tokyo is weakening its currency to give its exporters an advantage.
Mizuho Bank’s Dollar and Yen Forecast
Analysts at Mizuho Bank indicated that if the belief spreads that tariff reductions are imminent, this could positively impact tariff negotiations with other countries, leading to a decline in risk sentiment and a decrease in selling of US assets, which could support the dollar to 145 yen. Bank of Japan Policy and Inflation Developments
Bank of Japan Governor Kazuo Ueda affirmed the central bank’s commitment to raising interest rates if core inflation progresses toward its 2% target as expected. However, he stressed the need to assess the implications of US tariffs on the Japanese and global economies. Data showed that core consumer prices in Tokyo rose 3.4% in April from a year earlier, indicating an acceleration in inflation for the second consecutive month.
Large Companies Lower Forecasts Amid Economic Uncertainty
In a surprise move, several major companies have lowered or withdrawn their forecasts due to growing consumer uncertainty. Among these companies are Procter & Gamble, PepsiCo, Chipotle Mexican Grill, and American Airlines. These forecasts may be an indication of economic volatility increasingly affecting large companies.
Expected Earnings for Other Companies
Colgate-Palmolive is scheduled to report its earnings before the U.S. market opens on Friday, while China’s BYD, Ping An, and Tokyo-based chip testing equipment manufacturer Advantest are expected to report their earnings after the Asian market closes. These reports could help shape the economic outlook for the coming period.
Gold Stabilizes Amid Market Volatility
In precious metals, gold held steady at $3,349 an ounce. Analysts at Phillip Securities in Singapore note that the gold-to-S&P 500 ratio, a measure of investor pessimism, hit its highest level since the pandemic-induced bear market of 2020. This reflects increased demand for safe-haven assets amid economic uncertainty.
Bond Market Stabilizes
In the bond market, the pressures that had been weighing on the U.S. Treasury market, which saw a massive sell-off following the trade escalation under Trump’s tariffs, have eased. The yield on the 10-year U.S. Treasury note held steady at 4.30% on Friday, indicating some stability. On the other hand, Japanese bond yields rose along the curve following a higher-than-expected reading of the Tokyo Inflation Index. These movements indicate that markets are still reacting cautiously to current economic data.
Bitcoin’s Performance Amid Market Volatility
Bitcoin’s price stabilized around $93,200, after hitting a high of $94,489.92 on Wednesday, its strongest level since March 3. This stability comes amid global market volatility and monetary policy shifts in major economies.
Forward Outlook
Financial markets remain sensitive to developments in US-China trade relations, as well as central bank policies in major economies. Volatility in currency and stock markets is expected to continue amid these shifting factors.
