US dollar falls to three-month low amid tariffs' economic impact
The dollar dropped to a three-month low on Wednesday, driven by concerns over the negative impact of U.S. tariffs on the economy, with significant losses against the euro.
The Bloomberg Dollar Spot Index fell as much as 0.6% on Wednesday to its weakest level since Dec. 9. The euro was among the best performers against the greenback as Germany unveiled plans to boost defense and infrastructure investments, rising to $1.07, a level last seen on Nov. 11, News.Az reports, citing Bloomberg.
The dollar has been on a downward trend this week as the US put into force trade tariffs on Canada and Mexico, fueling concern that a global trade war will weigh on economic growth and force major central banks to cut interest rates further. Swaps imply 71 basis points of easing from the Federal Reserve by the end of the year, compared to 66 basis points on Friday.
At the same time, moves in Washington to decrease its defense presence in Europe have prompted leaders in the region to quickly plan to beef up its military capabilities. Germany plans to unlock hundreds of billions of euros for defense and infrastructure investments in a dramatic shift that sent the euro surging and the nation’s bonds slumping.
While the greenback is often considered as the safest of global currencies due to its liquidity and political stability, Deutsche Bank AG has put that into question. The bank’s global head of FX strategy George Saravelos said the currency may lose its traditional safe-haven status as global markets adjust to a new geopolitical order.
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