Dollar Dives as Trump’s Tariffs Shake Markets Ahead of US Jobs Report

The U.S. dollar slumped Friday as markets digested the economic impact of Trump’s aggressive new tariffs, just hours before the release of the crucial U.S. jobs report. The safe-haven yen rallied, heading for a six-month high, while the Swiss franc and euro gained momentum, underscoring investors’ growing fears of a global recession.

Markets were still reeling from the shock of Trump’s announcement — a 10% baseline import tariff and higher duties on key trading partners like Japan (24%) and the EU (20%). The dollar index (DXY) plunged 1.9% on Thursday, its worst day since November 2022, and lost another 0.3% in early Friday trading. With escalating trade tensions and growing speculation of a stagflationary scenario, confidence in the dollar is fading fast.

Tariff Fallout Sparks Rate Cut Expectations and Market Volatility

Traders have rapidly priced in four Fed rate cuts for 2025 — one each in June, July, October, and December — in response to mounting recession fears. At the same time, bets on further Bank of Japan tightening have evaporated, signaling a flight to lower-risk assets. All eyes are now on the U.S. non-farm payrolls report, expected to show a slowdown in job growth to 135,000 jobs in March, down from 151,000 in February. 

The results will offer key insights into the health of the labor market and the Fed’s next steps. Across the Pacific, the offshore yuan dropped 0.5% to 7.2450, while Australia and New Zealand’s currencies—often seen as barometers of risk appetite—plunged 1.38% and 1.28% respectively. Analysts warn that the impact on China, already facing combined duties of 64%, could be devastating.

Chart 1: Published by Trading View on April 4, 2025

According to the charts, currencies like the yen (USDJPY -0.31%) and Swiss franc (USDCHF -0.71%) are hitting multi-month highs. The euro has gone up to $1.1088, while sterling is held at $1.3101, reflecting broader weakness in the greenback. Even cryptocurrencies like Bitcoin remain near $83,000, despite chaos in the markets.

Adding to the turmoil, analysts like Deutsche Bank are warning of a crisis of confidence in the dollar. “Major shifts in capital flow allocations could take over from currency fundamentals,” one report stated, hinting at possible disorderly moves in foreign exchange markets.

Conclusion: A Tumultuous Road Ahead for the Greenback

The dollar taxes have impacted are echoing across global markets, challenging the greenback’s status as the reserve currency. As trade wars have increased, a slowdown of the U.S. economy, and aggressive Fed rate cut expectations, investors are increasingly seeking refuge in safe-haven assets. With the U.S. jobs report coming up, it’s unclear which way the dollar will go in the short term. People are waiting to see if the Federal Reserve will take action or not. One thing is certain—2025 has brought a new wave of uncertainty when it comes to the value of the dollar and global currencies.