The U.S. dollar weakened broadly on Monday, erasing last week’s gains, as renewed concerns over President Donald Trump’s tariff policies sparked fears of slower economic growth and higher inflation.
The decline followed Trump’s announcement on Friday that steel and aluminum tariffs would double to 50% starting Wednesday. Meanwhile, China’s Commerce Ministry dismissed U.S. allegations over critical mineral shipments as “groundless” and vowed strong countermeasures.
Treasury Secretary Scott Bessent hinted at de-escalation, saying Trump and Chinese President Xi Jinping were likely to speak soon to resolve the issue.
Market analyst Michael Brown from Pepperstone observed widespread selling pressure on the greenback, stating, “Each time tariff fears flare up, investors rush to dump U.S. assets in a classic ‘sell America’ move.”
The dollar fell 0.8% to 142.85 yen, nearly reversing last week’s gains against the Japanese currency. The euro climbed 0.8% to $1.14355, its highest since late April, ahead of the European Central Bank’s upcoming rate decision.
Further losses for the dollar came after U.S. manufacturing data showed a third consecutive month of contraction in May, with delivery delays indicating potential shortages due to tariffs. In contrast, European manufacturing showed signs of stabilization, while Asia’s factory output continued to struggle.
The dollar index, which tracks the greenback against six major currencies, eased 0.6% to 98.75—just above the three-year low of 97.923 seen in late April. The dollar has swung sharply in recent weeks amid the volatile trade policy environment, leading some investors to question its safe-haven appeal amid recession worries.
Morgan Stanley strategists expect the dollar to continue weakening over the next year, citing narrowing differences between U.S. and global growth and interest rates.
Last week, the dollar had briefly rallied after trade talks with the EU resumed and a U.S. court blocked parts of Trump’s tariffs. However, the ruling was quickly overturned on appeal, and administration officials said alternative legal avenues exist to enforce tariffs.
Mounting fiscal concerns have further driven the “sell America” trend, affecting both equities and bonds. This week, focus turns to the Senate’s review of a tax and spending bill that could add $3.8 trillion to the national debt over the next decade.
Barclays analysts warned that Section 899 of the bill could worsen sentiment, as it may allow the U.S. to tax investors from countries with “unfair foreign taxes,” potentially spooking capital markets.
Elsewhere, Poland’s zloty fell to a two-week low against the euro after the election of eurosceptic Karol Nawrocki as president stirred market uncertainty. Meanwhile, Bitcoin dropped 0.7% to $104,315.