The dollar index (DXY00) Thursday fell sharply by -1.64% and posted a 6-month low. The dollar plummeted Thursday because of concerns that President Trump’s sweeping new reciprocal tariffs will start a trade war that will derail the economy and force the Fed to cut interest rates. Also, Thursday’s plunge in the 10-year T-note yield to a 5-1/2 month low of 3.997% weakened the dollar’s interest rate differentials. In addition, the dollar may face a confidence crisis if President Trump’s tariffs prompt investors to dump US assets. The dollar extended its losses Thursday after the US Mar ISM services index fell more than expected to a 9-month low.
The dollar recovered from its worst levels Thursday after Fed Vice Chair Jefferson and Fed Governor Cook said the Fed should be in no hurry to adjust monetary policy and should hold interest rates steady for now.
