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Euro pares gains after Trump talks of hitting EU with 50%

tariff

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Yen catches safe-haven boost as dollar index sinks

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Trump also threatens 25% tariffs to Apple on non-US made

iPhones

(Updates to US morning trading)

By Chuck Mikolajczak

NEW YORK, May 23 (Reuters) - The euro pared gains

sharply on Friday, after U.S. President Donald Trump once again

ratcheted up his trade war, recommending the European Union be

hit with 50% tariffs beginning June 1, rekindling concern about

the impact of duties on the world economy and global trade.

Trump said in comments on social media that the EU was "very

difficult to deal with" and "our discussions with them are going

nowhere."

He threatened in a separate post to impose a 25% tariff on

Apple iPhones not made in the United States.

"One of the challenges I'm finding in the FX space ever

since these this reciprocal tariff thing came out is how we're

not seeing this traditional risk on, risk off behavior with the

dollar," said Erik Bregar, director of forex & precious metals

risk management, at Silver Gold Bull in Toronto.

"This morning's news is very euro-specific, so that's the

reason it's bumped euro and buy dollars initially, but zooming

out, it feels like we move between the de-dollarization trade

and taking it off, depending on what headline we get, and that's

a bit of a new paradigm."

The dollar index, which measures the greenback

against a basket of currencies, fell 0.48% to 99.43 after

dropping as much as 0.77% to 99.135 on the session.

The euro was up 0.38% at $1.1323 after climbing as

much as 0.83% to 1.1374 on the day.

For the week, the greenback is down 1.5%, on track for its

biggest weekly percentage decline since mid-April while the euro

was up 1.4% on the week.

Bregar said a high number of options on the euro that were

due to expire today may also have limited the move on the

tariffs announcement. In addition, Treasury Secretary Scott

Bessent said Trump's declaration was in response to the EU's

pace on tariff talks, indicating it may be a negotiating tool.

Against the safe-haven Japanese yen, the dollar

weakened 0.87% to 142.75 after falling as much as 1.1% on the

day. For the week, the greenback is down 1.9% against the

Japanese currency.

The Japanese currency got a boost earlier from data showing

Japan's core inflation accelerated at its fastest annual pace in

more than two years in April, raising the odds of another

interest rate hike by year-end from the Bank of Japan.

The data underscores the dilemma facing the Bank of Japan,

which must grapple with price pressures from persistent food

inflation as well as economic headwinds from Trump's tariffs.

Super-long Japanese government bonds have also scaled record

highs this week, although yields dipped on Friday.

After Moody's last week downgraded its U.S. debt ratings,

investor attention has focused on the country's $36 trillion

debt pile and Trump's tax bill, which could add trillions of

dollars more to it.

The bill narrowly passed the Republican-controlled U.S.

House of Representatives and now heads to the Senate for what is

likely to be weeks of debate, keeping investor sentiment fragile

in the near term.

Sterling strengthened 0.54% to $1.3487 after climbing

as much as 0.88%. For the week, the pound is up 1.6%.