Markets React as Trump’s Tariff Plans Shake Investor Confidence
Investors reacted nervously to US President Donald Trump’s tariff plan, triggering a sell-off in risk-sensitive currencies and cryptocurrencies. The market turmoil saw the US dollar strengthen as a safe-haven asset while Bitcoin and other digital assets experienced sharp declines.
Cryptocurrencies Suffer Heavy Losses
Bitcoin (BTC) tumbled over 5% on Friday, dropping to $79,650.40—its lowest level since November. Ether (ETH) followed suit, falling more than 5% to a 13-month low of $2,127.41. Both cryptocurrencies were on track for their steepest monthly declines since June 2022.
The sharp pullback followed optimism late last year that Trump’s administration would support the crypto industry. However, analysts now view Bitcoin as a risk asset rather than a hedge against inflation. Joshua Chu, co-chair of the Hong Kong Web3 Association, noted that the initial enthusiasm had faded, reinforcing Bitcoin’s volatility.
Currencies Weaken Amid Tariff Fears
The impact of Trump’s proposed tariffs extended beyond cryptocurrencies, affecting global currency markets. The Australian dollar (AUD) dropped 0.4% to a three-week low of $0.62105, extending its weekly loss to over 2%. Similarly, the New Zealand dollar (NZD) fell 0.5% to $0.5604, putting it on track for a weekly decline of 1.9%.
The euro (EUR) also struggled, slipping to a two-week low of $1.0380, while the Canadian dollar (CAD) dropped to C$1.4452, marking a 1.5% weekly decline.
“Markets were shaken out of tariff complacency,” said Sim Moh Siong, a currency strategist at Bank of Singapore. The US dollar’s strength could persist if tariff risks materialise by April.
Dollar Strengthens as Yields Decline
The US dollar hovered near a one-week high against a basket of currencies, with the dollar index standing at 107.34 after gaining 0.8% on Thursday. However, the index remained on track for a monthly loss of more than 1%, its worst performance since August.
A series of weaker-than-expected US economic data reports has fuelled expectations of additional Federal Reserve rate cuts. This has pushed Treasury yields lower, putting downward pressure on the dollar.
Rodrigo Catril, senior currency strategist at National Australia Bank, noted that declining yields and rising market volatility have heightened risk aversion.
Yen Gains as Bank of Japan Policy Shifts
While most major currencies struggled due to Trump’s tariff plan, the Japanese yen (JPY) gained 0.1% against the US dollar, reaching 149.60. The yen was set to rise over 3.7% for the month, marking its best performance since July.
Expectations of further rate hikes by the Bank of Japan (BOJ) supported the yen, as core consumer prices in Tokyo remained above the BOJ’s 2% target.
Meanwhile, the British pound (GBP) fell 0.12% to $1.2587 but remained on track for a monthly gain of more than 1.6%, marking its strongest performance in five months. The pound has been buoyed by expectations that the Bank of England will implement fewer rate cuts than the European Central Bank.
As markets continue to digest Trump’s tariff plans, investors remain cautious about further volatility across asset classes.
With inputs from Reuters
