Dollar wins reprieve from selling; investors yearn for tariff clarity

Singapore, Singapore/London, England - The dollar held steady on Tuesday, trading near a three-year low against the euro and a six-month trough against the yen, as investors trying to make sense of the constant changes to President Donald Trump's tariffs remained wary of US assets.

Much of the volatility that hit the dollar last week and sent Treasury yields soaring appeared to have abated somewhat on Tuesday, although investor sentiment was still fragile.

The euro, which has been one of the biggest beneficiaries of this month's dumping of US assets, was a touch weaker on the day at $1.1343, narrowly below last week's three-year high at $1.1474.

The dollar weakened by 0.2% against the yen to 142.855, not far off Friday's six-month low of 142.05.

After slumping to a 10-year low against the Swiss franc last week, the dollar was flat at 0.8144 francs on Tuesday. Still, it is down nearly 8% against the Swiss franc this month, set for its biggest monthly drop since December 2008.

Market focus has been on the ever-shifting tariff headlines, with the US removing smartphones and other electronics from its duties on China over the weekend providing some relief, although comments from Trump suggested the reprieve is likely to be short-term.

Trump's imposition and then abrupt postponement of most tariffs on goods imported to the US has sown confusion, adding to the uncertainty for investors and policymakers around the world.

There was a greater sense of calm across the market on Tuesday. But given the uncertainty Trump and his vacillation over tariffs have stirred up, analysts expected the reprieve for the dollar to be short-lived.

"With every U-turn in his 'dealmaking', the US president destroys further planning security and even more trust, which is why I ultimately do not expect any significant recovery in the U.S. dollar as long as this uncertainty persists," Commerzbank strategist Antje Praefcke wrote in a note.

The yield on the benchmark U.S. 10-year Treasury note edged up 2 basis points to 4.38% after dropping nearly 13 basis points in the previous session.

Yields rose about 50 bps last week - their biggest weekly increase in over 20 years - as analysts and investors questioned US bonds' status as the world's safest assets.

"Last week was all about deleveraging, liquidation, and asset re-allocation out of US assets. This week's tone is calmer in what is a holiday shortened week," said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities.

"Helping to set the tone were dovish comments from Fed officials suggesting they are looking beyond inflation."

Fed Governor Christopher Waller said on Monday the Trump administration's tariff policies are a major shock to the US economy that could lead the Federal Reserve to cut interest rates to head off a recession even if inflation remains high.

Traders are pricing in 86 bps of cuts from the Fed for the rest of the year, LSEG data showed.

The dollar index, which measures the US currency against six others, was at 99.74, not far from last week's three-year low. The index has fallen by more than 4% in April, set for its biggest monthly drop since November 2022.

The more risk-linked currencies enjoyed a bout of strength. Sterling was up 0.3% at $1.323, while the Australian dollar rose 0.4% to $0.6355 and the New Zealand dollar gained 0.8% to reach $0.592, near its highest in four and half months.

(Additional reporting by Ankur Banerjee in Singapore; Editing by Shri Navaratnam, Kim Coghill, Joe Bavier and Giles Elgood)