The value of the dollar has eroded completely since Donald Trump's victory in the presidential election in November due to his aggressive imposition of tariffs, causing disruptions in global markets.
The Bloomberg Dollar Spot Index is currently close to its lowest level since mid-October, just before the election, following a decline triggered by Trump's announcement of tariffs. Despite a slight recovery in Friday's trading, market instability increased again after China imposed tariffs on American imports.
The US dollar is set for its worst week in a month, dropping along with global bond yields and stocks. Concerns about tariffs have overshadowed a positive report on US job growth on Friday, where nonfarm payrolls exceeded all expectations in a survey of economists by Bloomberg.
Currency strategist Jayati Bharadwaj from TD Securities stated that market sentiments regarding tariffs and their potential impact on US growth are having more influence than concrete economic data.
The foreign exchange market, with a daily turnover of $7.5 trillion, was on edge leading up to Trump's tariff announcement on April 2, with uncertainty about the implications of levies causing fluctuations. Trump's actions to reverse globalization trends and subsequent measures have led investors to bet against the dollar.
Meera Chandan, co-head of global FX strategy at JPMorgan Chase & Co, noted a fundamental change in the overall picture. She suggested that this shift represents at least a cyclical change, potentially indicating the beginning of a structural weakening of the dollar after a prolonged period of dollar strength.
Amidst this turmoil, safe-haven currencies like the Swiss franc and the Japanese yen outperformed other major currencies, while the Australian dollar suffered a 3.2% decline following China's retaliatory measures on Friday - the most significant drop for the Aussie since March 2020.
A report released on Friday revealed an unexpected weakening in Canada's labor market in March, with the country losing the most jobs in over three years, causing the Canadian dollar to drop by as much as 1% on Friday after three days of gains.
This current scenario contrasts sharply with the beginning of the year when Trump's tax cuts and tariffs were viewed as factors supporting a potential rally in the dollar. In February, US Treasury Secretary Scott Bessent reassured that "the strong-dollar policy is completely intact with President Trump."