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Dollar steady with trade tensions and economic data in focus
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Dollar steady with trade tensions and economic data in focus
Jun 4, 2025 4:59 AM

TOKYO (Reuters) -The dollar wobbled against most major currencies on Wednesday as investors grappled with President Donald Trump's tariff negotiations with key trading partners, especially China, ahead of a batch of economic data.

The Trump administration has given a deadline of Wednesday for countries to submit their best offers on trade, the same day duties on imported steel and aluminium doubled.

Trump is also tipped by the White House to have a call this week with Chinese President Xi Jinping, after the two sides accused each other of violating the terms of an agreement last month to roll back some tariffs.

"What happened was that the market was quite relaxed about U.S. and China until we heard the sort of ramping up of rhetoric from Trump at the end of last week," said Fiona Cincotta, City Index's senior markets analyst.

"That has really put the focus back on this call and the market will be looking for a sense that the two leaders are at least getting towards the same page."

Trump on Wednesday posted on his social media platform that Xi was "tough" and "hard to make a deal with".

The Swiss franc edged 0.1% higher to 0.8233 francs to the dollar, while the dollar index, which measures the currency against six others, was flat at 99.194, not far from its late April low.

The euro rose 0.12% to $1.1384 by 1116 GMT ahead of the European Central Bank's decision on interest rates expected on Thursday.

Sterling was flat at $1.3552. The UK and its metal exports are exempt from the increased U.S. duties, given Britain has a trade deal in place.

In the meantime, traders were also keyed in on developments in Japanese markets after sources told Reuters the Bank of Japan is considering slowing down the pace of tapering in its bond purchases from next fiscal year onward.

The Japanese bond market was a main focus of market participants late last month, after a weak auction for longer-dated bonds further complicated the BoJ's efforts to reduce its presence in its debt market.

On Wednesday, the Japanese yen was down 0.14% at 144.155 per dollar, while yields on longer-dated tenors were marginally higher. [JP/]

FOCUS ON ECONOMIC HEALTH

Economic indicators have returned as a driver of the U.S. currency this week and sentiment overall has been buoyed by data so far that analysts say is yet to reflect the full damage of trade uncertainty.

In Europe, business activity was largely steady in May, a survey showed, with upcoming ECB rate cuts and potential fiscal stimulus anticipated to be the next catalyst.

Traders will also parse the ISM services sector report out of the U.S. along with ADP employment data that could reflect the health of the private sector. Friday will bring the highly anticipated monthly payrolls figures.

Elsewhere, the Canadian dollar was flat at C$1.3710 versus its U.S. peer. The Bank of Canada is likely to hold interest rates steady later on.

Both Canada and Mexico are exposed to the higher U.S. tariffs on industrial metals. Mexico's peso was steady.

South Korea's won strengthened about 1% to 1,363.92 per dollar after the victory of liberal candidate Lee Jae-myung in the country's presidential election.

Hong Kong's dollar was last flat at 7.8465 per greenback - which is close to the weak end of the Hong Kong Monetary Authority's trading range of 7.75-7.85 that it maintains against the dollar.

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