The dollar headed for its strongest weekly performance in nearly three years against major currencies, maintaining momentum on Friday (August 1st) after US President Donald Trump imposed new tariffs on dozens of trading partners.

Some currencies of the hardest-hit countries, such as Switzerland, which now faces 39% tariffs, fell sharply. The Swiss franc hit its weakest level in six weeks, while the Canadian dollar headed for its seventh straight weekly decline.

The dollar also strengthened against other currencies due to factors other than tariffs. The yen headed for its biggest weekly decline this year after the Bank of Japan signaled it was in no hurry to resume interest rate hikes, prompting Finance Minister Katsunobu Kato to say on Friday that officials were "concerned" about the currency's movements.

Friday also sees the release of the US monthly employment report, which is expected to show 110,000 workers were added to nonfarm payrolls in July. Much of the dollar's strength this month stems from investors' perception that Trump's tariffs haven't derailed the economy and, so far, haven't dramatically increased inflation.

The Federal Reserve, despite pressure from Trump on Chairman Jerome Powell to cut interest rates, has indicated it is in no rush to do so. Friday's payrolls report may have little impact on that assumption, although the weaker data has sparked selling in US assets like the dollar, according to IG strategist Chris Beauchamp.

"Fundamentally, the US economy is doing well, conditions aren't ideal, tariffs will hurt a little, and the market seems vulnerable to further short-term selling, just as an excuse to take some cash out to wait and see what happens," he said.

"There would have to be a lot of very bad data in a very short period between now and September to revive the impact of a September rate cut," he said. The dollar index, which tracks the US currency against a basket of six other currencies, is expected to rise 2.4% this week, its best weekly performance since a 3.1% rally in September 2022. The index was last up 0.1% at 100.13, its highest since late May. (alg)

Source: Reuters