TOKYO : The U.S. dollar pulled off an 11-week low versus major peers on Wednesday, helped by a rebound in short-term Treasury yields even as a run of weak economic data weighed on investor sentiment.
The Canadian dollar slipped to a two-week low and the Mexican peso was weaker with a new round of tariffs from U.S. President Donald Trump’s administration due to hit those neighbours next week.
“Currency markets remain fickle,” DBS analysts wrote in a client note, citing swings in the dollar over the course of this week.
In terms of the U.S. economy, “sentiment has been shaky for a while and any miss in data would place downward pressure on yields”, they said. “We suspect that this risk-off move may have further to go and expect U.S. yields to maintain a downward bias in the short term.”
The U.S. dollar index, which measures the currency against six major rivals, added 0.3 per cent to 106.51 in the Asian afternoon, rising from this week’s low of 106.13, the weakest level since December 10.
The dollar index weakened 0.5 per cent on Tuesday after the U.S. Conference Board said its consumer confidence index dropped 7 points, its largest fall since August 2021, to 98.3, well short of the 102.5 estimate of economists polled by Reuters.
The result added to other weak data, pushing expectations toward two quarter-point interest rate cuts by the Federal Reserve over the remainder of this year, with the next likely coming in July, according to market pricing.
The two-year U.S. Treasury yield declined as low as 4.074 per cent on Tuesday for the first time since November 1, but was up at 4.1271 per cent on Wednesday.
“U.S. data flow on net is now disappointing expectations, calling into question the U.S. exceptionalism narrative that had been USD supportive,” said Tapas Strickland, head of market economics at National Australia Bank.
U.S. Treasury Secretary Scott Bessent said on Tuesday the economy is more fragile under the surface than economic metrics suggest, citing interest rate volatility, sticky inflation and job growth focused on the government sector, while also saying that tariffs are an important source of revenue.
Trump said on Monday that tariffs against Canada and Mexico would proceed as scheduled, ostensibly from March 4.
The dollar rose as high as C$1.4332 in the latest session, its strongest level since February 12. It added 0.1 per cent to 20.4909 Mexican pesos.
The U.S. currency gained 0.3 per cent to 149.41 yen, rebounding from Tuesday’s low of 148.56 yen, its weakest since October 11.
The euro sank 0.2 per cent to $1.0492, after reaching $1.0528 on Monday, a level last seen on January 27.
Optimism for more spending in Germany has supported the single currency, although election winner Friedrich Merz on Tuesday ruled out a rapid reform to state borrowing limits – known as the “debt brake” – and said it was too soon to say whether the outgoing parliament could wave through a massive military spending boost.
A survey of German consumer sentiment is due later in the day.
Sterling slipped 0.2 per cent to $1.2640, after touching a more than two-month peak of $1.2690 at the start of the week.
The Australian dollar eased 0.3 per cent to $0.6324 after data earlier in the day showed growth in consumer prices dipped month-on-month in January, which may reassure the central bank of a cooling in inflation.
Bitcoin, the largest cryptocurrency by market capitalisation, was little changed at $88,558, after slumping 5.6 per cent on Tuesday and touching the lowest level since mid-November at $86,003.11.
Market nerves over U.S. tariffs has reinforced the blow to crypto investor confidence from last week’s $1.5 billion hack of ether from the Bybit exchange.
