- Euro hovers near 2-year low, investors wary may fall to $1
- Sterling nurses steep losses, eyes on UK gilt prices
- Yen rooted near levels that brought intervention in July
- Investors gird for Trump tariff plans
SINGAPORE, Jan 9 (Reuters) - The U.S. dollar charged ahead on Thursday, underpinned by rising Treasury yields, putting the yen, sterling and euro under pressure near multi-month lows amid the shifting threat of tariffs.
The focus for markets in 2025 has been on U.S. President-elect Donald Trump's policies as he steps back into the White House on Jan. 20, with analysts expecting his policies to both bolster growth and add to price pressures.
CNN on Wednesday reported that Trump is considering declaring a national economic emergency to provide legal justification for a series of universal tariffs on allies and adversaries. On Monday, the Washington Post said Trump was looking at more nuanced tariffs, which he later denied.
The evolving threat of tariffs has led bond yields higher, with the yield on the benchmark 10-year U.S. Treasury note hitting 4.73% on Wednesday, its highest since April 25. It was at 4.6628% on Thursday.
"Trump's shifting narrative on tariffs has undoubtedly had an effect on USD. It seems this capriciousness is something markets will have to adapt to over the coming four years," said Kieran Williams, head of Asia FX at InTouch Capital Markets.
"While tariff talk is likely to support USD in the short term, they also introduce complexities with unknown implications."
The bond market selloff has left the dollar standing tall and casting a shadow on the currency market.
The euro eased to $1.030475, lurking close to the two-year low it hit last week as investors remain worried the single currency may fall to the key $1 mark this year due to tariff uncertainties.
The pound slid nearly 0.5% to hit $1.2303 on Thursday, its weakest since April even as British government bond yields hit multi-year highs.
While the drop in both sterling and gilt prices were much sharper in September 2022 during the turmoil that followed former Prime Minister Liz Truss' "mini-budget", sentiment remains jittery.
"The moves are related to an ongoing concern about UK borrowing levels but I don't see enough of a reason for such a rapid market move," said Kyle Chapman, FX markets analyst at Ballinger Group.
"I think that we are going to see some recovery quite quickly once the market calms."
The dollar index , which measures the U.S. currency against six other units, stood at 109.11, just shy of the two-year high it touched last week.
The index has risen 5% since the U.S. election in early November as traders braced for Trump's policies as well as adjusted expectations of a measured pace of U.S. interest rate cuts.
The Federal Reserve last month jolted markets by projecting two rate cuts for 2025, down from four it had previously predicted, due to concerns about inflation as well as Trump administration policies.
The minutes of the December meeting, released on Wednesday, showed the central bank flagged new inflation concerns and officials saw a rising risk the incoming administration's plans may slow economic growth and raise unemployment.
With U.S. markets closed on Thursday, the spotlight will be on Friday's payrolls report as investors parse through data to gauge when the Fed will next cut rates.
Non-farm payrolls likely increased by 160,000 jobs in December after surging by 227,000 in November, a Reuters survey showed.
The yen strengthened a bit to 158.10 per dollar on the day, after touching a near six-month low of 158.55 on Wednesday, hovering near the key 160 mark that led to Tokyo intervening in the market last July.
The yen dropped more than 10% against the dollar last year and has made a sputtering start to 2025, with traders wary of another bout of intervention ahead of the Bank of Japan's meeting later in the month.
Reporting by Ankur Banerjee in Singapore; Editing by Jacqueline Wong and Christopher Cushing
Source: Reuters