By Alun John and Chibuike Oguh
NEW YORK/LONDON (Reuters) -The dollar rose against the euro and yen on Monday as markets were buoyed by a trade agreement between the U.S. and the EU, which brought some market certainty and averted a global trade war.
U.S. President Donald Trump and European Commission President Ursula von der Leyen reached a framework trade agreement on Sunday, which provides for an import tariff of 15% on EU goods, half the rate Trump had threatened from August 1.
That follows last week’s U.S. agreement with Japan, while top U.S. and Chinese economic officials resumed talks in Stockholm on Monday, aiming to extend a truce by three months and keep sharply higher tariffs at bay.
“If you rewind back to early April or Liberation Day, the overarching theme has been selling US assets because of uncertainties due to the new trade regime,” said Eugene Epstein, head of structuring for North America at Moneycorp in New Jersey. “I would argue that what you’re seeing is some resemblance of return to normalcy.”
The dollar rose against the safe-haven Swiss franc, up 1% at 0.80325 francs. It rose against the Japanese yen, up 0.59% at 148.535.
The euro was last down 1.25% at $1.159125, set for its biggest daily loss since mid-May, reversing an initial knee-jerk rise in Asia trade as investors’ focus shifted to what an easing in global trade tensions meant for the dollar overall.
The dollar tumbled sharply earlier this year, particularly against the euro, as fears that dramatically higher tariffs on trade with most of its major partners would hurt the U.S. economy caused investors to consider shifting out of U.S. assets.
U.S. stocks were mostly lower but still trading near record highs. The Dow Jones Industrial Average fell 0.3%, the S&P 500 dipped 0.15% and the Nasdaq Composite rose 0.14%.
Normally, the gap between yields on government bonds is a major factor for currency moves, but at present, the euro is significantly higher than the gap between U.S. and euro zone yields would imply.
“If you think about what we expected in the beginning of the year, no one really thought that the euro was going to be so strong. We all thought that, especially post Liberation Day, the dollar will remain strong,” said Anthi Tsouvali, multi-asset strategist at UBS Wealth. “We continue to see the dollar weakening.”
The euro fell against the yen and sterling, having hit a one-year high on the Japanese currency and a two-year high on the pound at the start of trade.
The dollar strengthened against the pound, which was 0.67% lower at $1.33545.
As concerns subside about the economic fallout from punishing tariffs, investor attention is shifting to corporate earnings and central bank meetings in the United States and Japan in the next few days.
Both the Fed and the Bank of Japan are expected to hold rates steady at policy meetings this week, but traders will watch subsequent comments to gauge the timing of the next moves.
Investors will also be watching to see Trump’s reaction to the Fed’s decision. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 1.5 basis points to 3.932%, from 3.917% late on Friday.
Trump has been putting the Fed under heavy pressure to make significant rate cuts, and Trump appeared close to trying to fire Powell last week, but backed off with a nod to the market disruption that would likely follow.
In cryptocurrencies, bitcoin fell 0.52% to $118,205.38. Ethereum declined 0.61% to $3,800.90.
Currency
Descripti RIC Last U.S. Pct YTD High Low
on Close Chan Pct Bid Bid
Dollar 98.65 97.612 1.08 -9.06 98.68 97.4
Euro/Doll 1.158 1.1738 -1.2 11.95 $1.17 $1.1
Dollar/Ye 148.5 147.66 0.6% -5.6% 148.5 147.
Euro/Yen 172.1 173.35 -0.6 5.48% 173.8 172.
Dollar/Sw 0.803 0.7953 1.01 -11.4 0.803 0.79
Sterling/ 1.335 1.3445 -0.6 6.76% $1.34 $1.3
Dollar/Ca 1.373 1.3697 0.28 -4.48 1.374 1.36
Aussie/Do 0.651 0.6565 -0.7 5.31% $0.65 $0.6
Euro/Swis 0.930 0.933 -0.2 -0.89 0.935 0.93
Euro/Ster 0.867 0.8739 -0.7 4.88% 0.876 0.86
NZ 0.596 0.6016 -0.8 6.65% $0.60 0.59
Dollar/No 10.19 10.147 0.51 -10.2 10.21 10.1
Euro/Norw 11.81 11.921 -0.8 0.42% 11.93 11.8
Dollar/Sw 9.614 9.5035 1.17 -12.7 9.619 9.49
Euro/Swed 11.14 11.164 -0.2 -2.83 11.19 11.1
(Reporting by Chibuike Oguh in New York and Rocky Swift in Tokyo and Alun John in London; Additional reporting by Twesha Dikshit and Kevin Buckland; Editing by Kevin Liffey, Nick Zieminski, Rod Nickel)
