Dollar Sinks on US Tariffs and Euro Strength

The dollar index (DXY00) Tuesday fell by -1.06%.  The dollar on Tuesday extended Monday’s losses to a 2-3/4 month low. The dollar fell on concern that US tariffs will spark a trade war that undercuts US economic growth.  Also, Tuesday’s rally in EUR/USD to a 2-3/4 month high undercut the dollar.  The dollar had some support for increased liquidity demand due to Tuesday’s slide in equity markets.

Hawkish comments from New York Fed President Williams were supportive for the dollar when he said that there’s still a lot of uncertainty about US tariff policy and what other countries will do in response, but they’ll “likely lead to somewhat higher prices this year.”