Dollar Index Hits Four-Month Low as Tariff Uncertainty Grows

The US dollar index (DXY) extended its losing streak for the fifth consecutive session, dropping to 103.7 on Friday—its lowest level in four months. This marks the longest period of decline for the dollar in nearly a year, as uncertainty over tariffs and economic policies weighs on investor sentiment.

Markets have been grappling with shifting trade policies under the Trump administration. Trump initially imposed a 25% tariff on goods from Mexico and Canada, then exempted autos, before ultimately suspending all tariffs on USMCA-covered products until April 2. While this move eased some immediate trade tensions, it also created confusion among investors, raising doubts about the consistency of US trade policies.

Market Sentiment Weakens Amid Economic Concerns

Despite the suspension of trade restrictions, early indicators suggest that the new administration’s policies are already affecting the economy. The declining dollar reflects growing concerns over economic stability, as investors question whether the US can sustain growth amid trade volatility.

Key factors contributing to dollar weakness include:

• Investor uncertainty over tariffs and trade policies.
• Speculation that the Federal Reserve may shift to a more dovish stance.
• Concerns about slowing economic growth and rising layoffs.

Traders Await US Jobs Report for Labor Market Insights

Markets are now focused on the upcoming US jobs report, which will provide crucial insights into the strength of the labor market. Analysts are particularly watching for signs that recent mass layoffs—including those at DOGE—are already affecting employment figures.

If job growth slows significantly, it could fuel expectations of potential Federal Reserve rate cuts, adding further pressure on the dollar. On the other hand, a strong jobs report could help stabilize market confidence, at least in the short term.

Outlook: Continued Market Volatility Expected

As the April 2 tariff deadline approaches, traders will closely monitor:

• Any further trade policy shifts from the Trump administration.
• The Federal Reserve’s stance on interest rates in response to economic data.
• Labor market performance, particularly in the wake of rising layoffs.

With tariff uncertainty persisting and economic risks mounting, the dollar index may face further downside pressure in the coming weeks.