Dollar set for weekly decline amid escalating global tensions

Dollar Faces Continued Pressure Amid Rising Global Tensions

By Rocky Swift

The U.S. dollar was on track for its second consecutive weekly loss as of Friday, with escalating trade disputes involving Cuba further fueling international uncertainty and reducing investor appetite for American assets.

The White House announced that President Donald Trump had authorized a new executive order to levy tariffs on nations supplying oil to Cuba. This move adds to a series of recent geopolitical flashpoints, including ongoing issues with Iran, Venezuela, Greenland, and Europe.

Speculation that Trump might authorize military action against Iran led to a spike in oil prices and put additional downward pressure on the dollar index (DXY).

On the domestic front, a bipartisan agreement in the Senate offered hope of preventing a partial government shutdown. Meanwhile, Japanese data revealed that inflation in Tokyo had slowed but remained in line with the central bank’s target.

According to Mantas Vanagas, a senior economist at Westpac Group, “The DXY continued its downward momentum as the prospect of U.S. military involvement in Iran weighed on the currency.”

The dollar index, which tracks the greenback against a selection of major currencies, edged up 0.2% to 96.35, reducing its weekly decline to 1.1%.

Currency Market Movements

• The euro slipped 0.2% to $1.194.
• The Japanese yen weakened by 0.17% to 153.39 per dollar.
• The British pound dropped 0.1% to $1.3791.

Earlier in the week, the dollar reached its lowest point in four years after President Trump appeared unconcerned about the currency’s softness. The greenback later regained some ground following Treasury Secretary Scott Bessent’s reaffirmation of Washington’s strong-dollar stance.

Sources indicate that Trump is considering targeted strikes against Iranian security forces and leaders in an effort to encourage protests, describing the deployment of U.S. naval vessels to the region as an “armada.”

Last week, the dollar recorded its steepest decline since the previous April, partly due to unease over U.S. policy regarding Greenland.

Support for the dollar emerged after the Federal Reserve opted to keep interest rates unchanged on Wednesday. Fed Chair Jerome Powell cited a robust U.S. economy and reduced risks to inflation and employment as reasons for the decision.

The yen, which has been under pressure, found some relief as the dollar weakened. The Japanese currency has hovered between 152 and 154 per dollar this week, amid speculation about potential rate checks by both U.S. and Japanese authorities—a step often seen as a precursor to intervention.

Data released on Friday showed that core consumer prices in Tokyo rose 2% year-on-year in January, a slowdown from the previous month but still meeting the Bank of Japan’s target.

• The Australian dollar fell 0.2% to $0.7033.
• The New Zealand dollar (kiwi) declined 0.2% to $0.6066.

Cryptocurrency Update

• Bitcoin slipped 0.1% to $84,309.27.
• Ether dropped 0.3% to $2,808.19.

Reported by Rocky Swift in Tokyo; Edited by Sam Holmes