The dollar sees its biggest weekly drop in a week! The gradual imposition of tariffs by the United States eases market tension.

In reports suggesting that Trump's incoming economic team is considering gradually increasing tariffs, the US dollar has fallen against almost all major currencies. In early Asian trading on Tuesday, the Bloomberg Dollar Spot Index fell by 0.4%, with reports indicating that Trump's economic advisors are discussing a slow and steady tariff approach rather than a sharp increase all at once. This measure may slow down inflationary pressures caused by tariffs and potentially provide more breathing room for the Federal Reserve to lower interest rates. This is the largest drop in the US dollar index since January 6, when reports of Trump planning to cut tariff plans led to a decline in the dollar. However, the president-elect denied this claim in a post on Truth Social. Carol Kong, a strategist at the Commonwealth Bank of Australia, said, "Unless Trump denies these reports in response to The Washington Post, the weakness in the dollar may continue." Risk-sensitive currencies such as the Australian dollar and New Zealand dollar jumped against the US dollar, indicating relief that there may be avoiding a major tariff shock. However, Mary Nicola, a strategist at Bloomberg Markets Live, stated, "There is no sign of a weakening in the dominance of the US dollar, laying the foundation for a challenging year ahead for Asian currencies." The decline in the US dollar highlights the crucial role tariffs play in shaping sentiment in the $7.5 trillion daily forex market. But this trend may be temporary: most Wall Street banks predict a stronger dollar, as last week's surge in job data raised further questions about potential rate cuts. Goldman Sachs predicts the dollar could appreciate by 5% or more this year. Data from the US Commodity Futures Trading Commission for the week ending January 7 show that speculative traders, including hedge funds and asset management companies, are the most bullish on the dollar since 2019. Win Thin, global currency strategist at Brown Brothers Harriman & Co. in New York, said regarding recent headlines, "You can't chase the move because the denial will come soon. Through the noise, you can rest assured that the dollar's rally will continue solely on the back of strong US economic performance." On Tuesday, the Philippine peso, Thai baht, and South African rand led emerging market currencies. This reduced losses since the beginning of the year as investors avoid riskier assets ahead of the incoming Trump administration. Eddie Cheung, senior emerging market strategist at Credit Agricole CIB, said, "The tariff news is beneficial for Asian forex markets as it indicates the US will take less severe measures, but right now, it's just a headline. Although the instinctive reaction is positive, I believe the market still needs more confirmation." The Bloomberg Dollar Spot Index fell on Tuesday after five consecutive days of gains. Following an 8% increase in 2024, the index has risen by approximately 0.6% this year.