Dollar weakens as rate cut odds rise, tariff uncertainties linger
(You can now subscribe to our
(You can now subscribe to our ETMarkets WhatsApp channel
The U.S. dollar wavered on Tuesday as the rising odds of Federal Reserve rate cuts weighed on sentiment, while investors assessed the broader economic impact of U.S. tariffs unleashed last week.The dollar remained under pressure following Friday's U.S. jobs report that showed cracks in the labour market, prompting traders to swiftly price in rate cuts next month.U.S. President Donald Trump's firing of a top statistics official and the resignation of Federal Reserve Governor Adriana Kugler also exacerbated market unease, leading to a sharp dive in the dollar on Friday.The U.S. currency found its footing on Monday but was weaker in early trading on Tuesday. The euro last bought $1.1579 while sterling stood at $1.3298.The dollar index, which measures the U.S. currency against six other units, was at 98.688 after touching a one-week low earlier in the session.Traders are now pricing in a 94.4% chance of the Fed cutting rates in its next meeting in September, compared to 63% a week earlier, CME FedWatch tool showed.Goldman Sachs expects the Fed to deliver three consecutive 25 basis point cuts starting in September, with a 50 basis point move possible if the unemployment rate climbs further in the next report.San Francisco Federal Reserve Bank President Mary Daly said on Monday that given mounting evidence that the U.S. jobs market is softening and no signs of persistent tariff-driven inflation, the time is nearing for rate cuts."I was willing to wait another cycle, but I can't wait forever," Daly said.Meanwhile, the focus remains on tariff uncertainties after the latest duties imposed on scores of countries last week by Trump, stoked worries about the health of the global economy.The Japanese yen firmed slightly to 146.95 per dollar after minutes of its June policy meeting showed a few Bank of Japan board members said the central bank would consider resuming interest rate increases if trade frictions de-escalate.The Swiss franc was steady at 0.8081 per dollar after dropping 0.5% in the previous session as Switzerland geared up to make a "more attractive offer" in trade talks with Washington to avert a 39% U.S. import tariff on Swiss goods that threatens to hammer its export-driven economy.The long-term impact of the tariffs though remains uncertain, with traders bracing for volatility."This is going to be like the pandemic, we all expect to see the transitory impact on supply chains to happen very quickly," said Rodrigo Catril, currency strategist at National Australia Bank in Sydney."It'll probably take six months to a year to see exactly where we land and who's going to be winners and losers from all this."In other currencies, the Australian dollar was 0.11% higher at $0.64736, while the New Zealand dollar rose 0.11% to $0.5914."We're still of a view that the big dollar is heading down," Catril said, referring to the U.S. dollar."While global growth means pro-growth currencies like Asian currencies and the AUD should struggle, we've other structural dynamics in the USD, where policies are dollar-negative."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
&w=3840&q=100)
First Post
9 minutes ago
- First Post
US imports from Russia surge 23% in 2025, India calls out Trump for hypocrisy amid tariff threats
Even as Donald Trump threatens India with tariffs over its oil imports from Russia, fresh data shows the US itself has quietly ramped up trade with Moscow, importing key commodities like uranium, fertilisers, and palladium despite earlier sanctions. read more Even as US President Donald Trump attempts to dictate tariff terms and impose penalties on India for importing oil from Russia, Washington's own trade with Moscow is quietly on the rise, even as it chastises New Delhi over its energy and defence ties. According to a report from The Indian Express, between January and May 2025, American imports from Russia rose by 23 per cent year-on-year to $2.1 billion, driven largely by uranium, palladium, and fertilisers. STORY CONTINUES BELOW THIS AD This surge comes despite earlier heavy US sanctions on Moscow. Following the outbreak of the Ukraine war in 2022, US imports from Russia plummeted from $30 billion in 2021 to just $3 billion by 2024. Crude oil, once the top US import from Russia, valued at over $17 billion in 2021, has virtually disappeared. Yet essential commodities such as fertilisers, uranium, and palladium continue to enter the US in significant volumes. According to data from the US International Trade Commission cited in the report, America imported $806 million worth of Russian fertilisers in the first five months of 2025, a 21 per cent increase from last year and 60 per cent higher than the same period in 2021. Uranium imports surged 28 per cent year-on-year to $596 million, nearly 150 per cent higher than in 2021. Although the US formally banned enriched uranium imports from Russia in 2024, companies are allowed to apply for waivers until 2028, a key reason behind the continuing flow. Palladium, primarily used in catalytic converters to reduce vehicle emissions, also remains a significant import. In 2024, the US imported $878 million worth of the metal from Russia. This growing trade has drawn scrutiny after President Donald Trump threatened steep new tariffs on Indian goods, accusing New Delhi of taking advantage of discounted Russian crude. STORY CONTINUES BELOW THIS AD India hit back sharply. 'The US continues to import uranium, palladium, and fertilisers from Russia even as it criticises us,' the Ministry of External Affairs (MEA) said on Monday. 'India's oil imports are based on economic necessity, not political preference.' The MEA had earlier criticised the US and European nations for what it called blatant hypocrisy. In 2024, the EU traded goods worth €67.5 billion and services worth €17.2 billion with Russia far surpassing India's total trade. European imports of Russian LNG also hit a record 16.5 million tonnes that year, higher than pre-war levels. 'Unlike India, whose trade is driven by national need, many Western countries continue their commerce with Russia by choice,' the MEA said.
Indian Express
9 minutes ago
- Indian Express
Stock markets decline in early trade dragged down by Oil & Gas shares, foreign fund outflows
Equity benchmark indices Sensex and Nifty declined in initial trade on Tuesday, dragged down by selling in oil & gas shares and persistent foreign fund outflows. Investor sentiment was further dampened after US President Donald Trump threatened to impose higher tariffs on India over its purchases of Russian oil. The 30-share BSE Sensex declined by 315.03 points or 0.39 per cent to 80,703.69 in early trade. The 50-share NSE Nifty went lower by 41.80 points or 0.17 per cent to 24,680.95. Among the Sensex firms, BEL, HDFC Bank, Reliance Industries, ICICI Bank, Infosys, Hindustan Unilever, Adani Ports, Mahindra & Mahindra, Asian Paints, and Tata Steel were the major laggards. Maruti, State Bank of India, HCL Technologies, Axis Bank, UltraTech Cement, Tata Motors, Titan, NTPC and Bajaj Finance were among the gainers. 'The latest tweet from President Donald Trump that 'I will be substantially raising US tariffs on India' for buying Russian oil is a big threat. If he walks his talk, India-US relations will further strain, and the impact on India's exports to the US can be worse than thought earlier. 'India's GDP growth and corporate earnings in FY26 will also be impacted. The market, still trading at elevated valuations, has not discounted such an eventuality. It remains to be seen how things evolve. India's response, with facts, that 'Targeting India is unjustified and unreasonable' sends a message that India will not be making undue concessions and compromises,' VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said. This means the market is in uncharted territory in the near-term. If President Trump raises tariffs on India further, the market will react negatively. Investors may wait and watch for the developments to unfold, he added. In Asian markets, South Korea's Kospi, Shanghai's SSE Composite index, Hong Kong's Hang Seng and Japan's Nikkei 225 index were quoted in positive territory. The US markets ended higher on Monday. Global oil benchmark Brent crude dipped 0.33 per cent to USD 68.53 a barrel. Foreign Institutional Investors (FIIs) offloaded equities worth Rs 2,566.51 crore while Domestic Institutional Investors (DIIs) outnumbered the FIIs by purchasing equities worth Rs 4,386.29 crore on Monday, according to exchange data. On Monday, the 30-share Sensex gained 418.81 points to settle at 81,018.72, and the NSE Nifty jumped by 157.40 points to close at 24,722.75.
Indian Express
9 minutes ago
- Indian Express
China price war, lack of clarity on US ‘penalty': What Indian exporters are discussing in tariff talks with American importers
Amid a sudden escalation of trade tensions between India and the US, with American President Donald Trump threatening to impose tariffs 'substantially' higher than the 25 per cent announced earlier, Indian exporters face a two-pronged challenge in maintaining access to their largest export market — the US. On the one hand, China has begun aggressively undercutting prices to outcompete other countries; on the other hand, the undefined 'penalty' over and above the 25 per cent reciprocal tariffs has complicated negotiations between US importers and Indian exporters, especially in low-margin products such as apparel and footwear. The uncertainty over the 'penalty' on India for purchasing Russian oil has come at a time when Indian exporters typically receive bulk summer orders, including for cotton garments, lightweight footwear, and linen clothing. Normally, exporters and importers share the burden of additional tariffs, but exporters said contracts have stalled due to the unknown penalty amount. 'A lot of exporters, particularly from the apparel and footwear sectors, are facing uncertainty because summer season orders are set to be placed very shortly. They are in touch with buyers, and some of them have even visited the US. But neither the buyer nor the seller is in a position to state what they are willing to negotiate, as the 'penalty' amount is unknown,' Ajay Sahai, director general & CEO of the Federation of Indian Export Organisations (FIEO), told The Indian Express. US retailers and apparel companies typically begin shipping merchandise from global suppliers at least two to three months before the summer season starts in April. Traders, typically, begin negotiating contracts much earlier. 'China has become a little more aggressive because they are outpriced by 5 per cent, and they are looking at the extent to which they can reduce the price. That's also a challenge. It may not be entirely possible for the exporter to absorb the duty, and therefore they are requesting that the government should chip in for a limited period only, as we hope that a bilateral trade agreement (BTA) will be concluded by September or October,' Sahai added. However, after Trump threatened to raise tariffs on Indian goods over its purchase of Russian oil, New Delhi on Monday said the targeting of India was 'unjustified and unreasonable', and that the country would take 'all necessary measures' to safeguard its 'national interests and economic security'. 'India is not only buying massive amounts of Russian oil, they are then, for much of the oil purchased, selling it on the open market for big profits… They don't care how many people in Ukraine are being killed by the Russian war machine. Because of this, I will be substantially raising the tariff paid by India to the USA,' Trump said in a post on his social media platform, Truth Social. Rating agency ICRA said that the higher-than-expected US tariffs on India — and the potential penalty linked to India's crude and defence purchases from Russia — are likely to pose a headwind to India's GDP growth in the current fiscal. 'We have lowered our growth forecast for India for FY2026 by 20 basis points to 6.0 per cent; the extent of the said penalties could result in a further downside,' the agency said. Simon J Evenett, Professor of Geopolitics and Strategy at the International Institute for Management Development (IMD), an independent academic institute in Switzerland, said in a LinkedIn post that tariff threats against India have 'nothing to do with economics'. He said that the United States has now antagonised all five of the original BRICS nations, home to more than 3.2 billion people. 'I struggle to see a coherent grand strategy here — other than to take on every possible pole of alternative power. None of the BRICS have the defence dependence on the USA that the EU, Korea, Japan, and the UK have — and that probably played the greater part in the latter's acquiescence to recent US tariff threats. So what is the US offering to the BRICS?' Evenett said. 'Access to the US market isn't a compelling answer. Take India. Its largest export to the USA is smartphones — does anyone else on the planet buy smartphones? Next biggest export is a variant of diamonds — there are other buyers for these too. Medicines are third on the list — same argument. Light oil next — you get the picture. Only one-sixth of Indian goods exports go to the USA. Big deal,' he added. As Trump has threatened several countries with additional tariffs over the re-routing of goods to the US, Deborah Elms, a trade and economic policy expert with the Hinrich Foundation, said in a LinkedIn post that one key complaint from the business community is the lack of clarity on what the US currently means by 'transshipment'. 'Given that tariffs are about to be 40 per cent on anything deemed to be transshipped, definitions are critically important. Typically, firms are required to 'substantially transform' products. In other words, you aren't allowed to simply take a box, slap a new label on it saying 'from country X', but must take raw materials, parts, and components to create something transformed. The amount of transformation is critically important. In a free trade agreement, officials spend months or years wrangling over these rules. Is there a value threshold that needs to be crossed? Is it a change in tariff heading? Subheading? Unfortunately, with new tariffs coming on August 7, we have no guidance at all on these rules,' Elms said. Ravi Dutta Mishra is a Principal Correspondent with The Indian Express, covering policy issues related to trade, commerce, and banking. He has over five years of experience and has previously worked with Mint, CNBC-TV18, and other news outlets. ... Read More
