Dollar Mixed Amid Tariff Uncertainty, Set for Monthly Gain Against Yen
The U.S. dollar traded with mixed performance on Friday, but remained on course to log a monthly gain versus the Japanese yen, as markets continued to factor in the likelihood that some form of trade tariffs will persist—even as President Donald Trump faces ongoing legal challenges to his authority.
A federal appeals court on Thursday temporarily reinstated Trump’s broadest tariffs, just a day after a U.S. trade court had ruled that he had overstepped his powers and ordered the tariffs to be blocked immediately.
Although the final scope of tariffs that will stay in place remains uncertain, traders increasingly believe that trade levies will survive in some modified form.
“Some version of tariffs is here to stay—maybe not as dramatic as what was announced on April 2, but they’re not going away entirely,” said Steve Englander, head of G10 FX research and macro strategy for North America at Standard Chartered’s New York office.
Englander added that the recent court decision may have dampened Trump’s ability to cause major market shocks with unexpected statements or policy shifts.
Meanwhile, White House trade adviser Peter Navarro stated Thursday that the administration is prepared to pursue tariffs through alternative legal mechanisms if court rulings go against them.
While concerns remain that tariffs could slow economic growth and stoke inflation, recent agreements to pause tariff hikes on China and the European Union during trade talks have slightly improved sentiment toward the U.S. economy.
The dollar briefly rallied on Friday after Trump accused China of violating a trade agreement, just a day after Treasury Secretary Scott Bessent acknowledged that talks with Beijing had stalled and may require direct involvement from the president.
Trade duties are also seen as a potential revenue source, as Congress deliberates a bill to reduce certain income taxes.
Economic data released Friday had little impact on the dollar. U.S. consumer spending in April rose only modestly, as buyers rushed earlier in the year to avoid higher import costs, while inflation showed further signs of easing.
A separate report revealed that the U.S. trade deficit in goods narrowed significantly in April, driven by a drop in advance purchases ahead of expected tariffs.
“The data was broadly in line with expectations—nothing surprising enough to spark major market movement,” Englander noted.
Looking ahead, attention turns to the May jobs report, set to be released next Friday. Markets will be watching closely for signs of labor market weakness, especially after jobless claims rose more than anticipated in the most recent data.
In currency markets:
- The euro fell 0.47% to $1.1317, heading for a modest 0.05% monthly decline, its first negative monthly performance since December.
- German inflation cooled further in May, edging closer to the European Central Bank’s 2% target and reinforcing expectations of a rate cut next week.
- The dollar slipped 0.14% to 143.99 yen, but is still on track for a 0.7% monthly gain against the yen—its strongest monthly showing since December, after four straight months of losses.
Data from Japan showed core inflation in Tokyo reached a more than two-year high, driven by rising food prices, keeping pressure on the Bank of Japan to tighten monetary policy further.
