Investing.com - The U.S. dollar strengthened on Friday as investors eyed tariff threats from President Donald Trump.
Some analysts have suggested that, despite a consistent drumbeat of tariff announcements from the White House since Trump’s return to power last month, the approach is potentially a negotiating ploy rather than policy objectives. Although he has issued a range of threats to countries around the world, Trump’s actions have so far been relatively lighter than the sweeping levies he promised during the 2024 presidential campaign.
Crucially, Trump has floated the idea of a possible trade deal with China, a statement that analysts at ING said is "in theory the most important" for currency markets.
"[B]ut in practice Trump’s comments on trade are weighed more carefully now," the ING analysts said in a note to clients.
Meanwhile, sentiment around the dollar was dented earlier this week by soft economic data and a disappointing sales forecast from Walmart (NYSE:WMT), the big-box retailer viewed as a bellwether of U.S. consumer spending, the analysts added.
Still, fourth-quarter earnings reports as a whole have been broadly solid, while Walmart executives said that they have seen "resilience" in American shoppers despite inflation lingering above the Fed’s 2% target level and worries over the impact of the tariffs on price growth.
The U.S. dollar index, which tracks the greenback against a basket of other currencies, rose 0.4% by 07:50 ET (12:50 GMT).
Elsewhere, the euro was lower by 0.4% against the dollar at $1.0463, after a raft of data showed a contraction in business activity in France and only tepid improvement in Germany. The countries are the twin economic powerhouses of Europe.
Sterling also inched down by 0.2% versus the dollar to $1.2639.
In Japan, core consumer prices rose by 3.2% in January compared to the previous year, marking the fastest increase in 19 months. Other data showed that the country’s manufacturing activity shrank for the eighth consecutive month in February amid labor shortages and persistent inflation.
The Bank of Japan (BoJ) recently raised its short-term interest rate to 0.5% and is expected to consider further hikes, potentially reaching 0.75% in the third quarter of 2025, if wage growth and consumption trends continue to support sustained inflation.
The yen touched a 2-1/2-month high against the U.S. dollar earlier in the day, reflecting market expectations of higher Japanese interest rates, although BoJ chief Kazuo Ueda noted the bank may contain long-term borrowing costs by purchasing government bonds.
(Ayushman Ojha contributed reporting.)