Dollar posts biggest loss on tariff angst

Chinese stocks get boost from Trump comments; yen volatile after expected rate hike from BOJ

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NEW YORK/LONDON:

The US dollar slid on Friday and was set for its biggest weekly loss in over a year after President Donald Trump suggested a softer stance on tariffs against China, adding to uncertainty about the trade policy that kept equity markets on edge.

Trump told Fox News on Thursday his recent conversation with President Xi Jinping was friendly and he thought he could reach a trade deal with China. "We have one very big power over China, and that's tariffs, and they don't want them, and I'd rather not have to use it, but it's a tremendous power over China," he said.

The US dollar dropped as much as 0.8% against a basket of currencies on Friday, before narrowing losses at the end of the day to be down 0.65%. But it still had its biggest weekly loss since November 2023, having lost 1.8% since Monday. Some analysts warned that the dollar could rise again if the US tariff and interest rate policies shifted.

The MSCI index for world stocks ended little changed, while stocks on Wall Street were lacklustre. The S&P 500 index was down 0.3%, the Dow Jones Industrial Average lost 0.3%, and the Nasdaq Composite shed 0.5%.

China's stock markets and currency rallied on the back of Trump's comments, leaving the blue chip index up 0.8% and the yuan strengthened against the dollar, which fell 0.7% to 7.239 in the offshore market.

Oil prices stabilised and pared losses that were incurred after Trump said he will be asking Saudi Arabia and OPEC to lower oil prices.

US crude futures edged higher to $74.66 a barrel and Brent crude was up 0.3% at $78.50. Amelie Derambure, Senior Multi-asset Portfolio Manager at Amundi in Paris, said Trump's pro-America policies require lower oil prices. European stocks reflected this greater optimism.

In currency markets, the yen gained 0.2% against the dollar to 155.7 after the Bank of Japan raised interest rates to their highest since the 2008 global financial crisis.

The European Central Bank and the Federal Reserve are due to meet next week as policymakers digest early moves of the Trump administration.